Cost Accounting CH 17 Solutions

CHAPTER17
PROCESSCOSTING
171 Industriesusingprocesscostingintheirmanufacturingareaincludechemicalprocessing,
oil refining, pharmaceuticals, plastics, brick and tile manufacturing, semiconductor chips,
beverages,andbreakfastcereals.
172 Process costing systems separate costs into cost categories according to the timing of
whencostsareintroducedintotheprocess.Often,onlytwocostclassifications,directmaterials
andconversioncosts,arenecessary.Directmaterialsare frequentlyaddedatonepointintime,
often the start or the end of the process, and all conversion costs are added at about the same
time,butinapatterndifferentfromdirectmaterialscosts.
173 Equivalentunitsisaderivedamountofoutputunitsthattakesthequantityofeachinput
(factorofproduction)inunitscompletedorinincompleteunitsinworkinprocess,andconverts
the quantity of input into the amount of completed output units that could be made with that
quantityofinput.Eachequivalentunitiscomprisedofthephysicalquantitiesofdirectmaterials
or conversion costs inputs necessary to produceoutputofone fully completed unit.Equivalent
unit measuresarenecessarysinceallphysicalunitsarenotcompletedtothesameextentatthe
sametime.
174 The accuracy of the estimates of completion depends on the care and skill of the
estimator and the nature of the process. Semiconductor chips may differ substantially in the
finishingnecessarytoobtainafinalproduct.Theamountofworknecessarytofinishaproduct
maynotalwaysbeeasytoascertaininadvance.
175 Thefivekeystepsinprocesscostingfollow:
Step1: Summarizetheflowofphysicalunitsofoutput.
Step2: Computeoutputintermsofequivalentunits.
Step3: Summarizetotalcoststoaccountfor.
Step4: Computecostperequivalentunit.
Step5: Assigntotalcoststounitscompletedandtounitsinendingworkinprocess.
176 Threeinventorymethodsassociatedwithprocesscostingare:
Weightedaverage.
Firstin,firstout.
Standardcosting.
177 The weightedaverage processcosting method calculates the equivalentunit cost of all
the work done to date (regardless of the accounting period in which it was done), assigns this
costtoequivalentunitscompletedandtransferredoutoftheprocess,andtoequivalentunitsin
endingworkinprocessinventory.
171
178 FIFO computations are distinctive because they assign the cost of the previous
accounting periods equivalent units in beginning workinprocess inventory to the first units
completedandtransferredoutoftheprocessandassignsthecostofequivalentunitsworkedon
duringthecurrentperiodfirsttocompletebeginning inventory,nexttostartandcompletenew
units,andfinallytounitsinendingworkinprocessinventory.Incontrast,theweightedaverage
method costs units completed and transferred out and in ending work in process at the same
averagecost.
179 FIFO should be called a modified or departmental FIFO method because the goods
transferredinduringagivenperiodusuallybearasingleaverageunitcost(ratherthanadistinct
FIFOcostforeachunittransferredin)asamatterofconvenience.
1710 A major advantage of FIFO is that managers can judge the performance in the current
periodindependentlyfromtheperformanceinthe precedingperiod.
1711 The journalentries inprocesscostingare basicallysimilartothose made in jobcosting
systems. The main difference is that, in process costing, there is often morethan one workin
processaccountoneforeachprocess.
1712 Standardcost procedures are particularly appropriate to processcosting systems where
therearevariouscombinationsofmaterialsandoperationsusedtomakeawidevarietyofsimilar
products as in thetextiles, paints, and ceramics industries. Standardcost procedures also avoid
theintricaciesinvolvedindetailedtrackingwithweightedaverageorFIFOmethodswhenthere
arefrequentpricevariationsovertime.
1713 There are two reasons why the accountant should distinguish between transferredin
costsandadditionaldirectmaterialscostsforaparticulardepartment:
(a) Alldirectmaterialsmaynotbeaddedatthebeginningofthedepartmentprocess.
(b)Thecontrolmethodsandresponsibilitiesmaybedifferentfortransferredinitemsand
materialsaddedinthedepartment.
1714 No. Transferredin costs or previous department costs are costs incurred in a previous
department that have been charged to a subsequent department. These costs may be costs
incurred in that previous department during this accounting period or a preceding accounting
period.
1715 Materialsareonlyonecostitem.Otheritems(oftenincludedinaconversioncostspool)
includelabor,energy,andmaintenance.Ifthecostsoftheseitemsvaryovertime,thisvariability
cancauseadifferenceincostofgoodssoldandinventoryamountswhentheweightedaverage
orFIFOmethodsareused.
A second factor is the amount of inventory on hand at the beginning or end of an
accountingperiod.Thesmallertheamountofproductionheldinbeginningorendinginventory
relativetothetotalnumberofunitstransferredout,thesmallertheeffectonoperating income,
costofgoodssold,orinventoryamountsfromtheuseofweightedaverageorFIFOmethods.
172
1716 (25min.) Equivalentunits,zerobeginninginventory.

1.
Directmaterialscostperunit($750,00010,000)
Conversioncostperunit($798,00010,000)
AssemblyDepartmentcostperunit
$75.00
79.80
$154.80
2a. SolutionExhibit1716Acalculatestheequivalentunitsofdirectmaterialsandconversion
costsintheAssemblyDepartmentof Nihon,Inc.inFebruary2009.
SolutionExhibit1716Bcomputesequivalentunitcosts.
2b. Directmaterialscostperunit
Conversioncostperunit
AssemblyDepartmentcostperunit
$75
84
$159
3. ThedifferenceintheAssemblyDepartmentcostperunitcalculatedinrequirements1and
2 arises because the costs incurred in January and February are the same but fewer equivalent
unitsofworkaredoneinFebruaryrelativetoJanuary.InJanuary,all10,000unitsintroducedare
fullycompletedresultingin10,000equivalentunitsofworkdonewithrespecttodirectmaterials
and conversion costs. In February, of the 10,000 units introduced, 10,000 equivalent units of
workisdonewithrespecttodirectmaterialsbutonly9,500equivalentunitsofworkisdonewith
respecttoconversioncosts.TheAssemblyDepartmentcostperunitis,therefore,higher.
SOLUTIONEXHIBIT1716A
Steps1and2:SummarizeOutputinPhysicalUnitsandComputeOutputinEquivalentUnits
AssemblyDepartmentof Nihon,Inc.forFebruary2009.
FlowofProduction
Workinprocess,beginning(given)
Startedduringcurrentperiod(given)
Toaccountfor
Completedandtransferredout
duringcurrentperiod
Workinprocess,ending*(given)
1,000 100%1,000 50%
Accountedfor
Workdoneincurrentperiod
(Step1)
Physical
Units
0
10,000
10,000
9,000
1,000
(Step2)
EquivalentUnits
Direct
Conversion
Materials
Costs
9,000
9,000
1,000
500
10,000
9,500
10,000
*Degreeofcompletioninthisdepartment:directmaterials,100%conversioncosts,50%.
173
SOLUTIONEXHIBIT1716B
ComputeCostperEquivalentUnit,
AssemblyDepartmentof Nihon,Inc.forFebruary2009.
(Step3)CostsaddedduringFebruary
Dividebyequivalentunitsofworkdone
incurrentperiod(SolutionExhibit17l6A)
Costper equivalentunit
Total
Production
Costs
$1,548,000
Direct Conversion
Materials
Costs
$750,000
$798,000
10,000
$75
9,500
$84
1717 (20min.) Journalentries(continuationof1716).

1.
2.
3.
WorkinProcessAssembly
AccountsPayable
Torecord$750,000ofdirectmaterials
purchasedandusedinproductionduring
February2009
Variousaccounts
Torecord$798,000ofconversioncosts
forFebruary2009examplesincludeenergy,
manufacturingsupplies,allmanufacturing
labor,andplantdepreciation
WorkinProcessTesting
Torecord9,000unitscompletedand
transferredfromAssemblytoTesting
duringFebruary2009at
$159 9,000units=$1,431,000
750,000
750,000
798,000
798,000
1,431,000
1,431,000
PostingstotheWorkinProcessAssemblyaccountfollow.
WorkinProcessAssemblyDepartment
Beginninginventory,Feb.1
0 3.Transferredoutto
1.Directmaterials
750,000
2.Conversioncosts
798,000
Endinginventory,Feb.28
117,000
174
1,431,000
1718 (25min.) Zerobeginninginventory,materialsintroducedinmiddleofprocess.

1.
Solution Exhibit 1718A shows equivalent units of work done in the current period of
ChemicalP,50,000ChemicalQ,35,000Conversioncosts,45,000.
2.
Solution Exhibit 1718B summarizes the total Mixing Department costs for July 2009,
calculatescostperequivalentunitofworkdoneinthecurrentperiodforChemicalP,Chemical
Q,andConversioncosts,andassignsthesecoststounitscompleted(andtransferredout)andto
unitsinendingworkinprocess.
MixingDepartmentofRoaryChemicalsforJuly2009.
(Step1)
Physical
FlowofProduction
Units
Workinprocess,beginning (given)
0
Startedduringcurrentperiod(given) 50,000
Toaccountfor
50,000
duringcurrentperiod
35,000
Workinprocess,ending* (given)
15,000
15,000 100%15,000 0%
15,000 662/3%
Accountedfor
50,000
Workdoneincurrentperiodonly
(Step2)
EquivalentUnits
ChemicalP
ChemicalQ
Conversion
Costs
35,000
35,000
35,000
15,000
10,000
50,000
35,000
45,000
*Degreeofcompletioninthisdepartment:ChemicalP,100%ChemicalQ,0%conversioncosts,662/3%.
175
Steps 3, 4, and 5: Summarize Total Coststo Account For, Compute Cost perEquivalent Unit,
andAssign Total Costs toUnitsCompletedandtoUnitsinEndingWorkinProcess
MixingDepartmentofRoaryChemicalsforJuly2009.
Total
Production
Costs
(Step3) CostsaddedduringJuly
Totalcoststoaccountfor
$455,000
$455,000
(Step4)Costsaddedincurrentperiod
Dividebyequivalentunitsofwork
doneincurrentperiod
(SolutionExhibit17l8A)
Costperequivalentunit
(Step5)Assignmentofcosts:
(35,000units)
Workinprocess,ending
(15,000units)
Totalcostsaccountedfor
ChemicalP
ChemicalQ
Conversion
Costs
$250,000
$250,000
$70,000
$70,000
$135,000
$135,000
$250,000
$70,000
$135,000
50,000
$
5
35,000
$
2
45,000
$
3
$350,000 (35,000* $5)+(35,000* $2)+(35,000* $3)

105,000
$455,000
(15,000 $5) + (0 $2) + (10,000 $3)

$250,000 +
$70,000 +
$135,000
*EquivalentunitscompletedandtransferredoutfromSolutionExhibit1718A,Step2.
Equivalentunitsinending workinprocessfromSolutionExhibit1718A,Step2.
1719 (15min.) Weightedaveragemethod,equivalentunits.

Under the weightedaverage method, equivalent units are calculated as the equivalent units of
workdonetodate.SolutionExhibit1719showsequivalentunitsofworkdonetodateforthe
AssemblyDivisionof FentonWatches,Inc.,fordirectmaterialsandconversioncosts.
SOLUTIONEXHIBIT1719
WeightedAverageMethodofProcessCosting,AssemblyDivisionofFentonWatches,Inc.,for
May2009.
(Step2)
(Step1)
EquivalentUnits
Physical
Direct Conversion
FlowofProduction
Units
Materials
Costs
Workinprocessbeginning(given)
80
500
Toaccountfor
580
Completedandtransferredoutduringcurrentperiod 460
460
460
Workinprocess,ending*(120 60%120 30%)
120
72
36
Accountedfor
580
______
Workdonetodate
532
496
176
1720 (20min.) Weightedaveragemethod,assigningcosts(continuationof1719).

SolutionExhibit1720summarizestotalcoststoaccountfor,calculatescostperequivalentunit
of work done to date in the Assembly Division of Fenton Watches, Inc., and assigns costs to
unitscompletedandtounitsinendingworkinprocessinventory.
SOLUTIONEXHIBIT1720
WeightedAverageMethodofProcessCosting,AssemblyDivisionofFentonWatches,Inc.,for
May2009.
Total
Production
Costs
$ 584,400
4,612,000
$5,196,400
(Step3) Workinprocess,beginning(given)
Costsaddedincurrentperiod(given)
(Step4) Costsincurredtodate
Dividebyequivalentunitsofworkdonetodate
(SolutionExhibit1719)
Costperequivalentunitofworkdonetodate
(Step5) Assignmentof costs:
Completedandtransferredout(460 units)
Workinprocess,ending(120 units)
*
$4,586,200
610,200
$5,196,400
Direct
Materials
$ 493,360
3,220,000
$3,713,360
Conversion
Costs
$91,040
1,392,000
$1,483,040
$3,713,360
$1,483,040
177
496
2,990
(460* $6,980) +(460* $2,990)

(72 $6,980) + (36 $2,990)
$3,713,360 + $1,483,040
EquivalentunitscompletedandtransferredoutfromSolutionExhibit1719,Step2.
Equivalentunitsinworkinprocess,endingfromSolutionExhibit1719,Step2.
532
6,980
1721 (15min.) FIFOmethod,equivalentunits.

UndertheFIFOmethod,equivalentunitsarecalculatedastheequivalentunitsofworkdonein
the current period only. Solution Exhibit 1721 shows equivalent units of work done in May
2009 in the Assembly Division of Fenton Watches, Inc., for direct materials and conversion
costs.
SOLUTIONEXHIBIT1721
FIFOMethodofProcessCosting,AssemblyDivisionof FentonWatches,Inc.,forMay2009.
FlowofProduction
Toaccountfor
Completedandtransferredoutduringcurrent
period:
Frombeginningworkinprocess
80 (100% -90%)80 (100% -40%)
Startedandcompleted
380 100%,380 100%
120 60%120 30%
Accountedfor
(Step1)
Physical
Units
80
500
580
(Step2)
EquivalentUnits
Direct
Conversion
Materials
Costs
(workdonebeforecurrentperiod)
80
8
48
380
380
72
36
460
464
380
120
___
580
Degreeofcompletioninthisdepartment:directmaterials,90%conversioncosts,40%.
460 physicalunitscompletedandtransferredoutminus80 physicalunitscompletedandtransferredoutfrom
beginningworkinprocessinventory.
178
1722 (20min.) FIFOmethod,assigningcosts(continuationof1721).

SolutionExhibit1722summarizestotalcoststoaccountfor,calculatescostperequivalentunit
ofworkdoneinMay2009intheAssemblyDivisionofFentonWatches,Inc.,andassignstotal
coststounitscompletedandtounitsinendingworkinprocessinventory.
SOLUTIONEXHIBIT1722
FIFOMethodofProcessCosting,AssemblyDivisionof FentonWatches,Inc.,forMay2009.
(Step3)Workinprocess,beginning(given)
Total
Production
Costs
$ 584,400
4,612,000
$5,196,400
Direct
Materials
$ 493,360
3,220,000
Conversion
Costs
$91,040
1,392,000
$1,483,040
$3,713,360
Dividebyequivalentunitsofworkdonein
currentperiod(SolutionExhibit1721)
Costperequiv.unitofworkdoneincurrentperiod
Completedandtransferredout(460units):
Workinprocess,beginning(80units)
Costsaddedtobeginningworkinprocess
incurrentperiod
Totalfrombeginninginventory
Startedandcompleted(380units)
Totalcostsofunitscompletedand
transferredout
Workinprocess,ending(120units)
*
$584,400
$3,220,000
460
$1,392,000
464
$3,000
7,000
$493,360
179
$91,040
(8* $7,000)+(48* $3,000)
200,000
784,400
3,800,000
(380 $7,000)+(380 $3,000)
4,584,400
612,000
$5,196,400
(72# $7,000) + (36# $3,000)

$3,713,360 + $1,483,040
EquivalentunitsusedtocompletebeginningworkinprocessfromSolutionExhibit1721,Step2.
EquivalentunitsstartedandcompletedfromSolutionExhibit1721,Step2.
#
Equivalentunitsinworkinprocess,endingfromSolutionExhibit1721,Step2.
1723 (2025min.) Standardcostingmethod,assigningcosts.

1.
StandardCostingMethodofProcessCostingforBuckysBoxesforJuly2010
(Step2)
EquivalentUnits
Direct
Conversion
Materials
Costs
185,000 (workdonebeforecurrentperiod)
(Step1)
Physical
Units
FlowofProduction
Toaccountfor
Completedandtransferredoutduringcurrentperiod:
185,000 (100% -100%)185,000 (100% 25%)
Startedandcompleted
327,000 100%,327,000 100%
138,000 100% 138,000 80%
Accountedfor
465,000
650,000
185,000
0
138,750
327,000
327,000
138,000
_______
465,000
110,400
_______
576,150
327,000
138,000
_______
650,000
512,000physicalunitscompletedandtransferredoutminus185,000physicalunitscompletedandtransferredout
frombeginningworkinprocessinventory.
1710
2.
Steps3,4,and5:SummarizeTotalCoststoAccountFor,ComputeCostperEquivalentUnit,
StandardCostingMethodofProcessCostingforBuckysBoxesforJuly2010
Costsaddedincurrentperiodatstandardcosts
Total
Production
Direct
Conversion
Costs
Materials
Costs
$ 337,625
$240,500+
$ 97,125
1,814,415 (465,000 $1.30) + (576,150 $2.10)
$2,152,040
$845,000
+
$1,307,040
(Step4) Standardcostperequivalentunit(given)
(Step5)Assignmentofcostsatstandardcosts:
Completedandtransferredout(512,000units):
Workinprocess,beginning(185,000units)
$ 337,625
Costsaddedtobeg.workinprocessincurrentperiod
291,375
629,000
Startedandcompleted(327,000units)
1,111,800
Totalcostsofunitstransferredout
1,740,800
Workinprocess,ending(138,000units)
411,240
$2,152,040
Summaryofvariancesforcurrentperformance:
Costsaddedincurrentperiodatstandardcosts(seeStep3above)
Actualcostsincurred(given)
Variance
$ 1.30
EquivalentunitsstartedandcompletedfromSolutionExhibit1723A,Step2.
EquivalentunitsinendingworkinprocessfromSolutionExhibit1723A,Step2.
1711
2.10
$240,500+
$97,125
(0* $1.30) +(138,750* $2.10)
(327,000 $1.30)+ (327,000 $2.10)
(138,000# $1.30) +(110,400# $2.10)
$845,000 +
$1,307,040
$604,500
$1,209,915
607,500
1,207,415
$ 3,000 U
$ 2,500F
*EquivalentunitstocompletebeginningworkinprocessfromSolutionExhibit1723A,Step2.
1724 (25min.) Weightedaveragemethod,assigningcosts.

1.&2.
SolutionExhibit1724AshowsequivalentunitsofworkdonetodateforBioDocCorporation
fordirectmaterialsandconversioncosts.
SolutionExhibit1724Bsummarizestotalcoststoaccountfor,calculatesthecostperequivalent
unit of work done to date for direct materials and conversion costs, and assigns these costs to
unitscompletedandtransferredoutandtounitsinendingworkinprocessinventory.
WeightedAverageMethodofProcessCosting,BioDoc CorporationforJuly2008.
FlowofProduction
Toaccountfor
duringcurrentperiod
20,000 100%20,000 50%
Accountedfor
Workdonetodate
(Step1)
Physical
Units
12,500
50,000
62,500
42,500
20,000
(Step2)
EquivalentUnits
Direct
Conversion
Materials
Costs
42,500
42,500
20,000
10,000
62,500
52,500
62,500
*Degreeofcompletion:directmaterials,100%conversioncosts,50%.
1712
WeightedAverageMethodofProcessCosting,BioDoc CorporationforJuly2008.
Total
Production
Costs
$162,500
813 ,750
$976,250
Dividebyequivalentunitsofworkdoneto
date (SolutionExhibit1724A)
(Step5) Assignmentofcosts:
Completedandtransferredout(42,500 units)
*Equivalentunitscompletedandtransferredout(given).
Equivalentunitsinendingworkinprocess(given).
1713
$735,250
241,000
$976,250
Direct
Materials
$ 75,000
350,000
$425,000
Conversion
Costs
$ 87,500
463,750
$551,250
$425,000
$551,250
62,500
$ 6.80
52,500
$ 10.50
(42,500* $6.80) +(42,500* $10.50)

(20,000 $6.80) + (10,000 $10.50)
$425,000 +
$551,250
1725 (30min.) FIFOmethod,assigningcosts.

1. & 2. Solution Exhibit 1725A calculates the equivalent units of work done in the current
period. Solution Exhibit 1725B summarizes total costs to account for, calculates the cost per
equivalentunitofworkdoneinthecurrentperiodfordirectmaterialsandconversioncosts,and
assignsthesecoststounitscompletedandtransferredoutandtounitsinendingworkinprocess
inventory.
FIFOMethodofProcessCosting,BioDoc CorporationforJuly2008.
(Step2)
EquivalentUnits
Direct
Conversion
Materials
Costs
12,500
(Step1)
Physical
Units
FlowofProduction
Toaccountfor
12,500 (100% -100%)12,500 (100% 70%)
Startedandcompleted
30,000 100%,30,000 100%
20,000 100% 20,000 50%
Accountedfor
50,000
62,500
12,500
0
3,750
30,000
30,000
20,000
10,000
50,000
43,750
30,000
20,000
62,500
1714
Steps3,4,and5:SummarizeTotalCoststoAccountFor,ComputeCostperEquivalentUnit,andAssignTotalCoststoUnits
CompletedandtoUnitsinEndingWorkinProcess
FIFOMethodofProcessCosting,BioDoc CorporationforJuly2008.
Total
Production
Costs
$162,500
813,750
Direct
Materials
$ 75,000
350,000
Conversion
Costs
$ 87,500
463,750
$976,250
$425,000
$551,250
$350,000
$463,750
50,000
43,750
$10.60
currentperiod(SolutionExhibit1725A)
Costperequivalentunitofworkdoneincurrentperiod
Costaddedtobeginningworkinprocessincurrentperiod
Totalcostsofunitscompletedandtransferredout
$162,500
39,750
202,250
528,000
730,250
246,000
$976,250
*EquivalentunitsusedtocompletebeginningworkinprocessfromSolutionExhibit1725A,Step2.
#
1715
$75,000 +
$87,500
*
(0 $7) +(3,750* $10.60)
(30,000 $7) +(30,000 $10.60)
(20,000# $7) +(10,000# $10.60)
$425,000
+ $551,250
1726 (30min.) Standardcostingmethod,assigningcosts.

1.
Thecalculationsofequivalentunitsfordirectmaterialsandconversioncostsareidentical
tothe calculations of equivalent units undertheFIFO method. Solution Exhibit 1725A shows
theequivalentunitcalculations forstandardcostingandcomputestheequivalentunitsofwork
done in July 2008. Solution Exhibit 1726 uses the standard costs (direct materials, $6.60
conversion costs, $10.40) to summarize total costs to account for, and to assign these costs to
unitscompletedandtransferredoutandtounitsinendingworkinprocessinventory.
2.
SolutionExhibit1726showsthedirectmaterialsandconversioncostsvariancesfor
Directmaterials
Conversioncosts
$20,000U
$8,750U
SOLUTIONEXHIBIT1726
Steps3,4,and5:SummarizeTotalCoststoAccountFor,ComputeCostperEquivalentUnit,
StandardCostingMethodofProcessCosting,BioDocCorporationforJuly2008.
Variance
Total
Production
Direct
Conversion
Costs
Materials
Costs
$173,500 (12,500 $6.60) + (8,750 $10.40)
785,000 (50,000 $6.60) +(43,750 $10.40)
$958,500
$412,500 +
$546,000
$6.60
$173,500
39,000
212,500
510,000
722,500
236,000
$958,500
(12,500 $6.60)+ (8,750 $10.40)

(0* $6.60)+(3,750* $10.40)
(30,000 $6.60)+ (30,000 $10.40)
(20,000# $6.60) + (10,000# $10.40)
$412,500
+
$546,000
$330,000
350,000
$ 20,000U
#
1716
$10.40
$455,000
463,750
$ 8,750 U
1727 (3540min.) Transferredincosts,weightedaveragemethod.

1, 2. & 3. Solution Exhibit 1727A calculates the equivalent units of work done to date.
unit of work done to date for transferredin costs, direct materials, and conversion costs, and
inventory.
WeightedAverageMethodofProcessCosting
FinishingDepartmentofAsayaClothingforJune2009.
(Step1)
Physical
Units
FlowofProduction
Transferredinduringcurrentperiod(given)
Toaccountfor
duringcurrentperiod
60 100% 60 0% 60 75%
Accountedfor
Workdonetodate
(Step2)
EquivalentUnits
Transferred
Direct Conversion
inCosts
Materials
Costs
75
135
210
150
60
150
150
150
60
45
210
150
195
210
*Degreeofcompletioninthisdepartment:transferredincosts,100%directmaterials,0%conversioncosts,75%.
1717
Steps3,4,and5:SummarizeTotalCoststoAccountFor,ComputeCostperEquivalentUnit,andAssignTotalCoststoUnits
WeightedAverageMethodofProcessCosting,
FinishingDepartmentof AsayaClothingforJune2009.
(Step3)
(Step4)
Costsincurredtodate
(SolutionExhibit1727A)
(Step5)
a
b
Assignmentofcosts:
Completedandtransferredout(150units)
Workinprocess,ending(60units):
Total
Production
Costs
$105,000
258,000
$363,000
Direct
Materials
$0
37,500
$37,500
Conversion
Costs
$ 30,000
78,000
$108,000
$217,500
$37,500
$108,000
210
$1,035.71
150
$250
195
$ 553.85
$275,934 (150a $1,035.71)+(150a $250) + (150a $553.85)

87,066 (60b $1,035.71) + (0b $250) + (45b $553.85)
$363,000
$ 217,500 + $37,500 +
$108,000
EquivalentunitscompletedandtransferredoutfromSol.Exhibit1727,step2.
EquivalentunitsinendingworkinprocessfromSol.Exhibit1727A,step2.
1718
Transferredin
Costs
$ 75,000
142,500
$217,500
1728 (3540min.) Transferredincosts,FIFOmethod.

SolutionExhibit1728Acalculatestheequivalentunitsofworkdoneinthecurrentperiod(for
transferredin costs, directmaterials, and conversion costs) to complete beginning workin
process inventory, to start and complete new units, and to produce ending work in process.
unitofworkdoneinthecurrentperiodfortransferredincosts,directmaterials,andconversion
costs,andassignsthesecoststounitscompletedandtransferredoutandtounitsinendingwork
inprocessinventory.
FIFOMethodofProcessCosting
(Step1)
FlowofProduction
Toaccountfor
Frombeginningworkinprocessa
[75 (100% 100%) 75 (100% 0%) 75 (100% 60%)]
Startedandcompleted
(75 100% 75 100% 75 100%)
Workinprocess,endingc (given)
(60 100% 60 0% 60 75%)
Accountedfor
(Step2)
EquivalentUnits
Physical Transferredin Direct Conversion

Units
Costs
Materials
Costs
75
135
210
75
0
75
30
75
75
75
60
___
135
0
___
150
45
___
150
75b
60
___
210
Degreeofcompletioninthisdepartment:Transferredincosts,100%directmaterials,0%conversioncosts,60%.
150physicalunitscompletedandtransferredoutminus 75physicalunitscompletedandtransferredoutfrombeginning
workinprocessinventory.
Degreeofcompletion inthisdepartment:transferredincosts,100%directmaterials,0%conversioncosts,75%.
1719
Steps3,4,and5:SummarizeTotalCoststoAccountFor,ComputeCostperEquivalentUnit,andAssign Total CoststoUnits
FIFOMethodofProcessCosting,
Total
Production
Costs
$ 90,000
246,300
$336,300
(Step4) Costsaddedincurrentperiod
Dividebyequivalentunitsofworkdoneincurrentperiod
Costsaddedtobeginningworkinprocessincurrentperiod
a
$ 90,000
34,350
124,350
130,416
254,766
81,534
$336,300
Transferredin
DirectMaterials ConversionCosts
Costs
$ 60,000
$
0
$ 30,000
130,800
37,500
78,000
$190,800
$37,500
$108,000
$130,800
$37,500
$ 78,000
135
$ 968.89
1720
150
520
$ 60,000
$
0
$ 30,000
(0a $968.89) +(75a $250) + (30a $520)
(75b $968.89) +(75b $250) + (75b $520)
(60c $968.89) + (0c $250) + (45c $520)
$190,800 +
$37,500
+ $108,000
EquivalentunitsusedtocompletebeginningworkinprocessfromSolutionExhibit1728A,step2.
EquivalentunitsstartedandcompletedfromSolutionExhibit1728A,step2.
c
EquivalentunitsinendingworkinprocessfromSolutionExhibit1728A,step2.
b
150
250
1729 (1520min.)Standardcostingmethod.
1. Since there was no additional work needed on the beginning inventory with respect to
materials,theinitialmulchmusthavebeen100%completewithrespecttomaterials.For
conversion costs, the work done to complete the opening inventory was 434,250
965,000=45%.Therefore,theunfinished mulch inopening inventory musthave been
55%completewithrespecttoconversioncosts.
2. It is clear that the ending WIP is also 100% complete with respect to direct materials
(1,817,0001,817,000),and it is60%(=1,090,2001,817,000)completewithregard
toconversioncosts.
3. We can first obtain the total standard costs per unit. The number of units started and
completedduringAugustis845,000,andatotalcostof$6,717,750isattachedtothem.
The per unit standard cost is therefore ($6,717,750 845,000) = $7.95. If x and y
represent the per unit cost for direct materials and conversion costs, respectively, we
thereforeknowthat:
x+y=7.95
Wealsoknowthattheendinginventoryiscostedat$12,192,070andcontains1,817,000
equivalent units of materials and 1,090,200 equivalent units of conversion costs. This
providesasecondequation:
1,817,000x+1,090,200y=12,192,070.
Solvingtheseequationsrevealsthatthedirectmaterialscostperunit,x,is$4.85,while
theconversioncostperunit,y,is$3.10.
4. Finally,theopening WIPcontained965,000equivalentunitsofmaterialsand(965,000
434,250) = 530,750 equivalent units of conversion costs. Applying the standard costs
computedinstep(3),thecostoftheopeninginventorymusthavebeen:
965,000$4.85+530,750$3.10=$6,325,575.
1721
1730 (25min.) Weightedaveragemethod.

1.
Sincedirectmaterialsareaddedatthebeginningoftheassemblyprocess,theunitsinthis
department must be 100% complete with respect to direct materials. Solution Exhibit 1730A
showsequivalentunitsofworkdonetodate:
Directmaterials
Conversioncosts
25,000equivalentunits
24,250equivalentunits
2.&3. Solution Exhibit 1730B summarizes the total Assembly Department costs for October
2009, calculates cost per equivalent unit of workdoneto date, and assigns these coststo units
completed (and transferred out) and to units in ending work in process using the weighted
averagemethod.
Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units
WeightedAverage Methodof Process Costing, Assembly DepartmentofLarsen Company, for
October2009.
(Step1)
FlowofProduction
Toaccountfor
duringcurrentperiod
2,500 100% 2,500 70%
Accountedfor
Workdonetodate
Physical
Units
5,000
20,000
25,000
22,500
2,500
(Step2)
EquivalentUnits
Direct
Conversion
Materials
Costs
22,500
22,500
2,500
1,750
25,000
24,250
25,000
1722
WeightedAverage Method of Process Costing, Assembly Department of Larsen Company,
forOctober2009.
Total
Production
Costs
$1,652,750
6,837,500
$8,490,250
Completedandtransferredout(22,500 units)
Direct
Materials
$1,250,000
4,500,000
$5,750,000
Conversion
Costs
$ 402,750
2,337,500
$2,740,250
$5,750,000
$2,740,250
25,000
$
230
24,250
$
113
$7,717,500 (22,500* $230)+ (22,500* $113)

772,750
(2,500 $230) + (1,750 $113)
$8,490,250
$6,150,000 + $2,619,000
EquivalentunitscompletedandtransferredoutfromSolutionExhibit1730A,Step2.
Equivalentunitsinworkinprocess,endingfromSolutionExhibit1730A,Step2.
1731 (10min.) Journalentries(continuationof1730).

1.
2.
3.
AccountsPayable
Directmaterialspurchasedandusedin
productioninOctober.
4,500,000
Variousaccounts
ConversioncostsincurredinOctober.
2,337,500
4,500,000
2,337,500
WorkinProcessTestingDepartment
7,717,500
7,717,500
Costofgoodscompletedandtransferredout
inOctoberfromtheAssemblyDepartmenttotheTestingDepartment.
Beginninginventory,October1 1,652,750 3.Transferredoutto
1. Directmaterials
4,500,000
2. Conversioncosts
2,337,500
EndingInventory,October31
772,750
1723
7,717,500
1732 (20min.) FIFOmethod(continuationof1730).

1.
Theequivalentunitsofworkdone inthecurrentperiodintheAssemblyDepartmentin
October2009fordirectmaterialsandconversioncostsareshowninSolutionExhibit1732A.
2.
The cost per equivalent unit of work done in the current period in the Assembly
Department in October 2009for direct materials and conversion costs is calculated in Solution
Exhibit1732B.
3.
Solution Exhibit 1732B summarizes the total Assembly Department costs for October
2009,andassignsthesecoststounitscompleted(andtransferredout)andunitsinendingworkin
processundertheFIFOmethod.
The cost per equivalent unit of beginning inventory and of work done in the current
perioddiffer:
Directmaterials
Conversioncosts
Totalcostperunit
Beginning
Inventory
$250.00 ($1,250,000 5,000equiv.units)
134.25 ($ 402,750 3,000equiv.units)
$384.25
Costperequivalentunit(weightedaverage)
Costperequivalentunit(FIFO)
Direct
Materials
$230*
$225**
WorkDonein
CurrentPeriod
$225.00
110.00
$335.00
Conversion
Costs
$113*
$110**
fromSolutionExhibit1730B
fromSolutionExhibit1732B
**
Thecostperequivalentunitdiffersbetweenthetwomethodsbecauseeachmethodusesdifferent
costs as the numerator of the calculation. FIFO uses only the costs added during the current
periodwhereasweightedaverageusesthecostsfromthebeginningworkinprocessaswellas
costs added during the current period. Both methods also use different equivalent units in the
denominator.
The following table summarizes the costs assignedto units completed andthose still in
processundertheweightedaverageandFIFOprocesscostingmethodsforourexample.
Weighted
Average
FIFO
(Solution
(Solution
Exhibit1730B) Exhibit1732B) Difference
Costofunitscompletedandtransferredout
$7,717,500
$7,735,250
+ $17,750
772,750
755,000
- $17,750
$8,490,250
$8,490,250
1724
The FIFO ending inventory is lower than the weightedaverage ending inventory by
$17,750. This is because FIFO assumes that all the highercost priorperiod units in work in
processarethefirsttobecompletedandtransferredoutwhileendingworkinprocessconsistsof
onlythelowercostcurrentperiodunits.Theweightedaveragemethod,however,smoothesout
cost per equivalent unit by assuming that more of the lowercost units are completed and
transferredout,whilesomeofthe highercostunitsin beginningwork inprocessareplaced in
endingworkinprocess.So,inthiscase,theweightedaveragemethodresultsinalowercostof
unitscompletedandtransferredoutandahigherendingworkinprocessinventoryrelativeto the
FIFOmethod.
AssemblyDepartmentof LarsenCompanyforOctober2009.
(Step1)
(Step2)
EquivalentUnits
Direct
Conversion
Materials
Costs
Physical
FlowofProduction
Units
20,000
Toaccountfor
25,000
period:
5,000 (100% -100%) 5,000 (100% - 60%) 5,000
0
2,000
Startedandcompleted
17,500 100%,17,500 100%
17,000
17,500
17,500
2,500
2,500 100% 2,500 70%
_____
2,500
1,750
Accountedfor
25,000
______
20,000
21,250
22,500 physicalunitscompletedandtransferredoutminus 5,000 physicalunitscompletedandtransferredoutfrom
1725
Steps 3, 4, and 5:Summarize Total Coststo Account For, Compute Cost perEquivalent Unit, and AssignTotalCoststo
UnitsCompletedandtoUnitsinEndingWorkinProcess
FIFOMethodofProcessCosting,AssemblyDepartmentof LarsenCompanyforOctober2009.
Total
Production
Costs
$1,652,750
6,837,500
$8,490,250
Completedandtransferredout(22,500 units):
Startedandcompleted(17,500 units)
Totalcostsofunitscompleted&transferredout
$1,652,750
220,000
1,872,750
5,862,500
7,735,250
755,000
$8,490,250
Equivalent unitsstartedandcompletedfromSolutionExhibit1732A,Step2.
#
1726
Direct
Materials
$1,250,000
4,500,000
$5,750,000
Conversion
Costs
$ 402,750
2,337,500
$2,740,250
$4,500,000
$2,337,500
20,000
$
225
21,250
110
$1,250,000 + $ 402,750
(0* $225) + (2,000* $110)
(17,500 $225) + (17,500 $110)
(2,500# $225) + (1,750# $110)
$5,750,000 + $2,740,250
1733 (30min.) Transferredincosts,weightedaveragemethod(relatedto1730to1732).

1.
Transferredin costs are 100% complete, and direct materials are 0% complete in both
beginning and ending workinprocess inventory. The reason is that transferredin costs are
always100%completeassoonastheyaretransferredinfromtheAssemblyDepartmenttothe
Testing Department. Direct materials in beginning or ending work in process for the Testing
Departmentare0%completebecausedirectmaterialsareaddedonlywhenthetestingprocessis
90% complete and the units in beginning and ending work in process are only 70% and 60%
complete,respectively.
2.
Solution Exhibit 1733A computes the equivalent units of work done to date in the
TestingDepartmentfortransferredincosts,directmaterials,andconversioncosts.
3.
Solution Exhibit 1733B summarizes total Testing Department costs for October 2009,
calculates the cost per equivalent unit of work done to date in the Testing Department for
transferredin costs, direct materials, and conversion costs, and assigns these costs to units
completedandtransferredoutandtounitsinendingworkinprocessusingtheweightedaverage
method.
4.
Journalentries:
a. WorkinProcessTestingDepartment
duringOctoberfromtheAssembly
DepartmenttotheTestingDepartment
b. FinishedGoods
duringOctoberfromtheTestingDepartment
toFinishedGoodsinventory
1727
7,717,500
7,717,500
23,459,600
23,459,600
TestingDepartmentof LarsenCompanyforOctober2009.
(Step1)
Physical
FlowofProduction
Units
7,500
Transferredinduringcurrentperiod(given)22,500
Toaccountfor
30,000
duringcurrentperiod
26,300
3,700
3,700 100% 3,700 0% 3,700 60%
Accountedfor
30,000
Workdonetodate
(Step2)
EquivalentUnits
Transferredin Direct Conversion
Costs
Materials
Costs
26,300
26,300
26,300
3,700
2,220
30,000
26,300
28,520
1728
Steps3,4,and5:SummarizeTotalCoststoAccountFor,ComputeCostperEquivalentUnit,andAssignTotal CoststoUnitsCompleted
andtoUnitsinEndingWorkinProcess
Total
Production
Costs
$ 3,767,960
21,378,100
$25,146,060
(Step4)Costsincurredtodate
Equivalentunitcostsofworkdonetodate
Completedandtransferredout(26,300units)
$23,459,600
1,686,460
$25,146,060
*EquivalentunitscompletedandtransferredoutfromSolutionExhibit1733A,Step2.
1729
Transferred
inCosts
$ 2,932,500
7,717,500
$10,650,000
Direct
Materials
$0
9,704,700
$9,704,700
Conversion
Costs
$ 835,460
3,955,900
$4,791,360
$10,650,000
$9,704,700
$4,791,360
26,300
$
369
28,520
$
168
30,000
355
(26,300* $355) + (26,300* $369) + (26,300* $168)

(3,700 $355) + (0 $369)
+ (2,220 $168)
$10,429,500
+ $9,704,700
+
$4,791,360
1734 (30min.) Transferredincosts,FIFOmethod(continuationof1733).

1.
As explained in Problem 1733, requirement 1, transferredin costs are 100% complete
anddirectmaterialsare0%completeinbothbeginningandendingworkinprocessinventory.
2.
The equivalent units of work done in October 2009 in the Testing Department for
transferredincosts,directmaterials,andconversioncostsarecalculatedinSolutionExhibit17
34A.
3.
Solution Exhibit 1734B summarizes total Testing Department costs for October 2009,
calculatesthecostperequivalentunitofworkdoneinOctober2009intheTestingDepartment
for transferredin costs, direct materials, and conversion costs, and assigns these costs to units
completedandtransferredoutandtounitsinendingworkinprocessusingtheFIFOmethod.
4.
Journalentries:
a. WorkinProcessTestingDepartment
duringOctoberfromtheAssemblyDept.to
theTestingDept.
b. FinishedGoods
duringOctoberfromtheTestingDepartment
toFinishedGoodsinventory.
1730
7,735,250
7,735,250
23,463,766
23,463,766
FlowofProduction
Toaccountfor
period:
7,500 (100% -100%)7,500 (100% -0%)
7,500 (100% -70%)
Startedandcompleted
18,800 100%18,800 100%18,800 100%
3,700 100%3,700 0%3,700 60%
Accounted for
(Step2)
(Step1)
EquivalentUnits
Physical Transferred
Direct
Conversion
Units
inCosts
Materials
Costs
7,500
22,500
30,000
7,500
0
7,500
2,250
18,800
18,800
18,800
3,700
2,220
______
22,500
_____
26,300
18,800
3,700
______
30,000
23,270
26,300physicalunitscompletedandtransferredoutminus 7,500physicalunitscompletedandtransferredoutfrom
1731
Steps3,4,and5:SummarizeTotalCoststoAccountFor,ComputeCostperEquivalentUnit,andAssignTotalCoststo
Total
Production
Costs
$ 3,717,335
21,395,850
$25,113,185
Costperequiv.unitofworkdoneincurrentperiod
$ 3,717,335
3,150,000
6,867,335
16,596,431
23,463,766
1,649,419
$25,113,185
Direct
Materials
$
0
9,704,700
$9,704,700
Conversion
Costs
$ 835,460
3,955,900
$4,791,360
$ 7,735,250
$9,704,700
$3,955,900
26,300
$ 369.00
23,270
$170.00
22,500
343.79
$2,881,875 +
$0
+ $835,460
(0* $343.79)+ (7,500* $369.00)+ (2,250* $170.00)
(18,800 $343.79)+(18,800 $369.00)+(18,800 $170.00)
(3,700# $343.79) + (0# $369.00) +(2,220# $170.00)
$10,617,125
+ $9,704,700
+ $4,791,360
#
1732
Transferredin
Costs
$ 2,881,875
7,735,250
$10,617,125
1735 (25min.) Weightedaveragemethod.

SolutionExhibit1735Ashowsequivalentunitsofworkdonetodateof:
Directmaterials
Conversioncosts
625equivalentunits
525equivalentunits
Note that direct materials are added when the Assembly Department process is 10%
complete. Both the beginning and ending work in process are more than 10% complete and
henceare100%completewithrespecttodirectmaterials.
Solution Exhibit 1735B summarizes the total Assembly Department costs for April
2009,calculatescostperequivalentunitofworkdonetodatefordirectmaterialsandconversion
costs, and assigns these costs to units completed (and transferred out), and to units in ending
workin processusingtheweightedaveragemethod.
WeightedAverage Method of Process Costing, Assembly Department of Porter Handcraft for
April2009.
(Step1)
FlowofProduction
Toaccountfor
duringcurrentperiod
125 100% 125 20%
Accountedfor
Workdonetodate
Physical
Units
75
550
625
500
125
(Step2)
EquivalentUnits
Direct
Conversion
Materials
Costs
500
500
125
25
625
525
625
1733
WeightedAverageMethodofProcessCosting,Assembly Departmentof Porter,April2009.
Total
Production
Costs
Direct
Materials
Conversion
Costs
$ 1,910
28,490
$30,400
$ 1,775
17,600
$19,375
$ 135
10,890
$11,025
$19,375
$11,025
625
$
31
Dividebyequivalentunitsofworkdoneto
date(SolutionExhibit1735A)
Workinprocess,ending(125units)
*
$26,000
4,400
$30,400
(500* $31)+(500* $21)

(125 $31)+ (25 $21)
$19,375
+ $11,025
1734
525
21
1736 (510min.)
Journalentries(continuationof1735).
1. WorkinProcess AssemblyDepartment
AccountsPayable
Torecorddirectmaterialspurchasedand
usedinproductionduringApril
17,600
2. WorkinProcessAssembly Department
VariousAccounts
Torecord Assembly Departmentconversion
costsforApril
10,890
3. WorkinProcessFinishingDepartment
WorkinProcessAssembly Department
Torecordcostofgoodscompletedandtransferred
outinAprilfromtheAssembly Department
totheFinishingDepartment
26,000
17,600
10,890
26,000
Beginninginventory,April1
1,910 3.Transferredoutto
1.Directmaterials
17,600
WorkinProcessFinishing
2.Conversioncosts
10,890
Endinginventory,April30
4,400
1735
26,000
1737 (20min.) FIFOmethod(continuationof1735).

TheequivalentunitsofworkdoneinApril2009intheAssembly Departmentfordirectmaterials
andconversioncostsareshowninSolutionExhibit1737A.
SolutionExhibit1737BsummarizesthetotalAssemblyDepartmentcostsforApril2009,
calculatesthecostperequivalentunitofworkdoneinApril2009intheAssemblyDepartment
for direct materials and conversion costs, and assigns these costs to units completed (and
transferredout)andtounitsinendingworkinprocessundertheFIFOmethod.
Theequivalentunitsofworkdoneinbeginninginventoryis:directmaterials,75 100%=
75andconversioncosts75 40%=30.Thecostperequivalentunitofbeginninginventoryand
ofworkdoneinthecurrentperiodare:
Directmaterials
Conversioncosts
Beginning
Inventory
$23.67($1,775 75)
$4.50 ($135 30)
WorkDonein
CurrentPeriod
(CalculatedUnder
FIFOMethod)
$32
$22
The following table summarizes the costs assigned to units completed and those still in
processundertheweightedaverageandFIFOprocesscostingmethodsforourexample.
Weighted
Average
FIFO
(Solution
(Solution
$26,000
$25,850
$150
4,400
4,550
+$150
$30,400
$30,400
TheFIFOendinginventoryishigherthantheweightedaverageendinginventoryby$150.
ThisisbecauseFIFOassumesthatallthelowercostpriorperiodunitsinworkinprocessarethe
first to be completed and transferred out while ending work in process consists of only the
highercostcurrentperiodunits.Theweightedaveragemethod,however,smoothesoutcostper
equivalentunitbyassumingthatmoreofthehighercostunitsarecompletedandtransferredout,
while some of the lowercost units in beginning work in process are placed in ending work in
process. Hence, in this case, the weightedaverage method results in a higher cost of units
completedandtransferredoutandalowerendingworkinprocessinventoryrelativetotheFIFO
method.
1736
FIFOMethodofProcessCosting,Assembly Departmentof PorterHandcraftforApril2009.
FlowofProduction
Toaccountfor
75 (100% -100%)75 (100% - 40%)
Startedandcompleted
425 100% 425 100%
125 100% 125 20%
Accountedfor
(Step1)
Physical
Units
75
550
625
(Step2)
EquivalentUnits
Direct
Conversion
Materials
Costs
75
0
45
425
425
125
25
550
495
425
125
625
500 physical units completed and transferred out minus 75 physical units completed and transferred out from
FIFOMethodofProcessCosting,Assembly Departmentof PorterHandcraftforApril2009.
currentperiod(Exhibit1737A)
Costperequivalentunitofworkdoneincurrent
period
Completedandtransferredout(500 units):
Costsaddedtobegin.workinprocessin
currentperiod
Totalcostsofunitscompleted&tsfd.out
Workinprocess,ending(125 units)
Total
Production
Costs
$ 1,910
28,490
$30,400
Direct
Materials
$ 1,775
17,600
$19,375
$17,600
Conversion
Costs
$ 135
10,890
$11,025
$10,890
550
495
32
$ 1,910
$1,775
990
2,900
22,950
25,850
4,550
$30,400
(0* $32) +
$135
(45* $22)
(425 $32) + (425 $22)

(125# $32) +
$19,375
+
Equivalent unitsstartedandcompletedfromSolutionExhibit1737A,Step2.
#
1737
22
(25# $22)
$11,025
1738 (30min.) Transferredincosts,weightedaverage.

1.
BindingDepartmentfortransferredincosts,directmaterials,andconversioncosts.
Solution Exhibit 1738B summarizes total Binding Department costs for April 2009,
calculates the cost per equivalent unit of work done to date in the Binding Department for
completedandtransferredoutandtounitsinendingworkinprocessusingtheweightedaverage
method.
2.
Journalentries:
a. WorkinProcessBindingDepartment
WorkinProcessPrintingDepartment
duringAprilfromthePrintingDepartment
to theBindingDepartment
b. FinishedGoods
WorkinProcessBindingDepartment
duringAprilfromtheBindingDepartment
toFinishedGoodsinventory
144,000
144,000
249,012
249,012
BindingDepartmentof Publish,Inc.forApril2009.
(Step1)
FlowofProduction
Toaccountfor
Workin process,endinga (given)
(600 100% 600 0% 600 60%)
Accountedfor
Workdonetodate
a
(Step2)
EquivalentUnits
Physical Transferred Direct Conversion
Units
inCosts Materials Costs
900
2,700
3,600
3,000
3,000
3,000
3,000
600
600
0
360
3,600
3,600
3,000
3,360
Degreeofcompletioninthisdepartment:transferredincosts,100%directmaterials,0%conversioncosts,60%.
1738
Steps3,4,and5:SummarizeTotalCoststoAccountFor,ComputeCostperEquivalentUnit,andAssignTotalCoststo
(Step3)
Workin process,beginning(given)
(Step4)
Costsincurredtodate
(Step5)
Total
Production Transferredin
Costs
Costs
$ 47,775
$ 32,775
239,700
144,000
$287,475
$176,775
Assignmentofcosts:
$249,012
38,463
Total costsaccountedfor
$287,475
EquivalentunitscompletedandtransferredoutfromSol.Exhibit1738A,step2.
EquivalentunitsinendingworkinprocessfromSol.Exhibit1738A,step2.
1739
Direct
Materials
$0
26,700
$26,700
Conversion
Costs
$15,000
69,000
$84,000
$176,775
$26,700
$84,000
3,600
$49.104
3,000
$8.90
3,360
$
25
(3,000a $49.104) +(3,000a $8.90) + (3,000a $25)

(600b $49.104) +
(0b $8.90) + (360b $25)
$176,775
+ $26,700
+ $84,000
1739 (30min.) Transferredincosts,FIFOmethod(continuationof1738).

1.
SolutionExhibit1739AcalculatestheequivalentunitsofworkdoneinApril2009inthe
BindingDepartmentfortransferredincosts,directmaterials,andconversioncosts.
Solution Exhibit 1739B summarizes total Binding Department costs for April 2009,
calculatesthecostperequivalentunitofworkdoneinApril2009intheBindingDepartmentfor
completedandtransferredoutandtounitsinendingworkinprocessusingtheFIFOmethod.
Journalentries:
a. WorkinProcessBindingDepartment
WorkinProcessPrintingDepartment
duringAprilfromthePrintingDepartmentto
theBindingDepartment.
b.
FinishedGoods
WorkinProcessBindingDepartment
duringAprilfromtheBindingDepartment
toFinishedGoodsinventory.
141,750
141,750
240,525
240,525
2.
Theequivalentunitsofworkdoneinbeginninginventoryis:Transferredincosts,900
100%=900directmaterials,900 0%=0andconversioncosts,900 40%=360.Thecost
perequivalentunitofbeginninginventoryandofworkdoneinthecurrentperiodare:
Transferredincosts(weightedaverage)
Transferredincosts(FIFO)
Directmaterials
Conversioncosts
Beginning
Inventory
$36.42($32,775 900)
$30.95($27,855 900)
$41.67($15,000 360)
WorkDonein
CurrentPeriod
$53.33($144,000 2,700)
$52.50($141,750 2,700)
$ 8.90
$23.00
The following table summarizes the costs assigned to units completed and those still in
process under the weightedaverage and FIFO processcosting methods for the Binding
Department.
Weighted
Average
FIFO
(Solution
(Solution
$249,012
$240,525
$8,487
38,463
39,780
+$1,317
$287,475
$280,305
1740
The FIFO ending inventory is higher than the weightedaverage ending inventory by
$1,317. This is because FIFO assumes that all the lowercost priorperiod units in work in
process(resulting fromthe lowertransferredincostsinbeginning inventory)arethefirsttobe
completed and transferred out while ending work in process consists of only the highercost
currentperiodunits.Theweightedaverage method,however,smoothesoutcostperequivalent
unit by assuming that more of the highercost units are completed and transferred out, while
someofthelowercostunitsinbeginningworkinprocessareplacedinendingworkinprocess.
Hence,inthiscase,theweightedaveragemethodresultsinahighercostofunitscompletedand
transferred out and a lower ending workinprocess inventory relative to FIFO. Note that the
difference in cost of units completed and transferred out ($8,487) does not fully offset the
difference in ending workinprocess inventory (+$1,317). This is because the FIFO and
weightedaveragemethodsresultindifferentvaluesfortransferredincostswithrespecttoboth
beginninginventoryandcoststransferredinduringtheperiod.
(Step1)
FlowofProduction
Toaccountfor
Frombeginningworkinprocessa
[900 (100% 100%) 900 (100% 0%) 900
Startedandcompleted
(2,100 100% 2,100 100% 2,100 100%)
Workinprocess,endingc (given)
(600 100% 600 x 0% 600 60%)
Accountedfor
a
(Step2)
EquivalentUnits
Physical Transferredin Direct Conversion

Units
Costs
Materials
Costs
900
2,700
3,600
900
(100% 40%)]
900
540
2,100
2,100
2,100
600
____
2,700
0
____
3,000
360
____
3,000
2,100b
600
____
3,600
3,000physicalunitscompletedandtransferredoutminus 900physicalunitscompletedandtransferredoutfrombeginning
workinprocessinventory.
Degreeofcompletioninthisdepartment:transferredincosts,100%directmaterials,0%conversioncosts,60%.
1741
Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Costs to Units
Total
Production
Costs
TransferredinCosts
$ 42,855
$ 27,855
237,450
141,750
$280,305
$169,605
Dividebyequivalentunitsofworkdoneincurrentperiod(Sol.
Exhibit1739A)
Costsaddedtobeginningworkinprocessincurrentperiod
a
$ 42,855
20,430
63,285
177,240
240,525
39,780
$280,305
1742
Conversion
Costs
$15,000
69,000
$84,000
$141,750
$26,700
$69,000
2,700
$ 52.50
3,000
$ 8.90
3,000
$23.00
$27,855+
(0a $52.50)+
$0+
$15,000
(900a $8.90)+ (540a $23)
(2,100b $52.50)+(2,100b $8.90)+(2,100b $23)

(600c $52.50) +
$169,605
+
EquivalentunitsusedtocompletebeginningworkinprocessfromSolutionExhibit1739A,step2.
EquivalentunitsstartedandcompletedfromSolutionExhibit1739A,step2.
c
EquivalentunitsinendingworkinprocessfromSolutionExhibit1739A,step2.
b
Direct
Materials
$
0
26,700
$26,700
(0c $8.90) + (360c $23)

$26,700
+
$84,000
1740 (45min.) Transferredincosts,weightedaverageandFIFOmethods.

1.
Drying and Packaging Department for transferredin costs, direct materials, and conversion
costs. Solution Exhibit 1740B summarizes total Drying and Packaging Department costs for
week 37, calculates the cost per equivalent unit of work done to date in the Drying and
Packaging Department for transferredin costs, direct materials, and conversion costs, and
usingtheweightedaveragemethod.
2.
Solution Exhibit 1740C computesthe equivalent unitsof work done in week 37 in the
Drying and Packaging Department for transferredin costs, direct materials, and conversion
costs. Solution Exhibit 1740D summarizes total Drying and Packaging Department costs for
week 37, calculates the cost per equivalent unit of work done in week 37 in the Drying and
Packaging Department for transferredin costs, direct materials, and conversion costs, and
usingtheFIFOmethod.
DryingandPackagingDepartmentofFritoLayInc.forWeek37.
(Step1)
(Step2)
EquivalentUnits
Physical Transferred Direct Conversion
FlowofProduction
Units
inCosts
Materials
Costs
1,250
Transferredinduringcurrentperiod(given) 5,000
Toaccountfor
6,250
duringcurrentperiod
5,250
5,250
5,250
5,250
1,000
1,000 100%1,000 0%1,000 40%
1,000
0
400
Accountedfor
6,250
Workdonetodate
6,250
5,250
5,650
1743
Steps3,4,and5:SummarizeTotalCoststoAccountFor,ComputeCostperEquivalentUnit,andAssignTotal
Costs toUnitsCompletedandtoUnitsinEndingWorkinProcess
(Step3)
(Step4)
Costsincurredtodate
Dividebyequivalentunitsofworkdone
todate(SolutionExhibit1740A)
Equivalentunitcostsofworkdonetodate
(Step5)
Assignmentofcosts:
Total
Production
Costs
$38,060
159,600
$197,660
$174,300
23,360
$197,660
1744
Transferred
inCosts
$29,000
96,000
$125,000
Direct
Materials
$0
25,200
$25,200
Conversion
Costs
$9,060
38,400
$47,460
$125,000
$25,200
$47,460
6,250
$20
5,250
$4.80
5,650
$8.40
(5,250*$20)+ (5,250*$4.80)+(5,250*$8.40)
(1,000 $20) + (0 $4.80) + (400 $8.40)
$125,000 +
$25,200
+ $47,460
SOLUTIONEXHIBIT1740C
FlowofProduction
Toaccountfor
1,250 (100% - 100%)1,250 (100% - 0%)
1,250 (100% - 80%)
Startedandcompleted
4,000 100%4,000 100%4,000 100%
1,000 100%1,000 0%1,000 40%
Accountedfor
(Step1)
Physical
Units
1,250
5,000
6,250
(Step2)
EquivalentUnits
Transferred
Direct
Conversion
inCosts
Materials
Costs
1,250
0
1,250
250
4,000
4,000
4,000
1,000
400
5,000
5,250
4,650
4,000
1,000
6,250
5,250physicalunitscompletedandtransferredoutminus1,250physicalunitscompletedandtransferredoutfrom
1745
SOLUTIONEXHIBIT1740D
Steps3,4,and5:SummarizeTotalCoststoAccountFor,ComputeCostperEquivalentUnit,andAssignTotalCosts
toUnitsCompletedandtoUnitsinEndingWorkinProcess
Total
Production
Costs
$37,980
157,600
$195,580
Dividebyequivalentunitsofworkdoneincurrentperiod
(SolutionExhibit1740C)
Transferred
inCosts
$ 28,920
94,000
$122,920
Direct
Materials
$0
25,200
$25,200
Conversion
Costs
$ 9,060
38,400
$47,460
$94,000
$25,200
$38,400
5,000
$18.80
5,250
$4.80
4,650
$8.258
$37,980
8,065
46,045
127,432
173,477
22,103
$195,580
$28,920+
$0
+
$9,060
*
*
(0 $18.80) + (1,250 $4.80) + (250 $8.258)
*
(4,000 $18.80)+(4,000 $4.80)+(4,000 $8.258)

(1,000# $18.80) +(0# $4.80) +
$122,920 + $25,200
(Step3)
*
EquivalentunitsusedtocompletebeginningworkinprocessfromSolutionExhibit1740C,Step2.
EquivalentunitsstartedandcompletedfromSolutionExhibit1740C,Step2.
#
EquivalentunitsinendingworkinprocessfromSolutionExhibit1740C,Step2.
1746
(400# $8.258)
$47,460
1741 (3035min.)Weightedaverageandstandardcostingmethod.
1.
SolutionExhibit1741AcomputestheequivalentunitsofworkdoneinNovember2010
by PaquitasPearlsCompanyfordirectmaterialsandconversioncosts.
2.and3.
SolutionExhibit1741BsummarizestotalcostsofthePaquitasPearlsCompany
forNovember30,2010and,usingthestandardcostperequivalentunitfordirectmaterialsand
conversioncosts,assignsthesecoststounitscompletedandtransferredoutandtounitsinending
work in process. The exhibit also summarizes the cost variances for direct materials and
conversioncostsforNovember2010.
StandardCostingMethodof ProcessCosting,
PaquitasPearlsCompanyforthemonthendedNovember30,2010.
(Step2)
EquivalentUnits
Direct
Conversion
Materials
Costs
(Step1)
Physical
Units
FlowofProduction
Toaccountfor
25,000 (100% -100%)25,000 (100% 75%)
Startedandcompleted
100,000 100%,100,000 100%
26,250 100% 26,250 50%
Accountedfor
126,250
151,250
25,000
0
6,250
100,000
100,000
26,250
_______
126,250
13,125
_______
119,375
100,000
26,250
_______
151,250
1747
Steps3,4,and5:SummarizeTotalCoststoAccountFor,ComputeCostper
EquivalentUnit,andAssignTotal CoststoUnitsCompletedandtoUnitsin
EndingWorkinProcess
StandardCostingMethodofProcessCosting,
PaquitasPearlsCompanyforthemonthendedNovember30,2010.
Total
Production
Direct
Conversion
Costs
Materials
Costs
$ 250,000
$ 62,500+ $ 187,500
1,509,375 (126,250 2.50) + (119,375 $10.00)
$1,759,375
$378,125
+
$1,381,250
$ 250,000
62,500
312,500
1,250,000
1,562,500
196,875
$1,759,375
Variance
2.50
1748
10.00
$62,500
+
$187,500
(0* $2.50) +(6,250* $10.00)
(100,000 $2.50) + (100,000 $10.00)
(26,250# $2.50) + (13,125# $10.00)
$378,125 +
$1,381,250
$315,625
327,500
$ 11,875 U
$1,193,750
1,207,415
$ 13,665 U
1742 (2530min.)Operationcosting
1. Toobtaintheoverheadrates,dividethebudgetedcostofeachoperationbythepairsofshoes
thatareexpectedtogothroughthatoperation.
Operation 1
Operation2
Operation3
Operation4
Operation5
Operation6
Budgeted
Conversion
Cost
$145,125
58,050
4,275
67,725
13,500
2,025
Budgeted
Pairsof
Shoes
32,250
32,250
2,250
32,250
30,000
2,250
Conversion
CostperPair
ofShoes
$4.50
1.80
1.90
2.10
0.45
0.90
2.
Shoetype:
Quantity:
DirectMaterials
Operation1
Operation2
Operation3
Operation4
Operation5
Operation6
Total
WorkOrder
10399
Basic
1,000
$13,000
4,500
1,800
0
2,100
450
0
$21,850
WorkOrder
10400
Elaborate
150
$4,200
675
270
285
315
0
135
$5,880
Thedirectmaterialscostsperunitvarybasedonthetypeofshoe($390,00030,000=$13for
theBasic,and$63,0002,250=$28fortheElaborate).Conversioncostsarechargedusingthe
rates computed in part (1), taking into account the specific operations that each type of shoe
actuallygoesthrough.
3.
Workorder10399(Basicshoes):
Workorder10400(Elaborate shoes):
Totalcost
$21,850
Dividedbynumberof
pairsofshoes:
1,000
Costperpairofplainshoes: $ 21.85
Totalcost:
$5,880
Dividedbynumberof
pairsof shoes:
150
Costperpairoffancyshoes: $39.20
1749

Cost Accounting CH 17 Solutions

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Cost Accounting CH 17 Solutions

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CHAPTER17

1716 (25min.) Equivalentunits,zerobeginninginventory.

1717 (20min.) Journalentries(continuationof1716).

1718 (25min.) Zerobeginninginventory,materialsintroducedinmiddleofprocess.

$350,000 (35,000* $5)+(35,000* $2)+(35,000* $3)

(15,000 $5) + (0 $2) + (10,000 $3)

1719 (15min.) Weightedaveragemethod,equivalentunits.

1720 (20min.) Weightedaveragemethod,assigningcosts(continuationof1719).

(460* $6,980) +(460* $2,990)

1721 (15min.) FIFOmethod,equivalentunits.

1722 (20min.) FIFOmethod,assigningcosts(continuationof1721).

(8* $7,000)+(48* $3,000)

(380 $7,000)+(380 $3,000)

(72# $7,000) + (36# $3,000)

1723 (2025min.) Standardcostingmethod,assigningcosts.

1724 (25min.) Weightedaveragemethod,assigningcosts.

(42,500* $6.80) +(42,500* $10.50)

1725 (30min.) FIFOmethod,assigningcosts.

1726 (30min.) Standardcostingmethod,assigningcosts.

(12,500 $6.60)+ (8,750 $10.40)

1727 (3540min.) Transferredincosts,weightedaveragemethod.

$275,934 (150a $1,035.71)+(150a $250) + (150a $553.85)

1728 (3540min.) Transferredincosts,FIFOmethod.

Physical Transferredin Direct Conversion

1730 (25min.) Weightedaveragemethod.

$7,717,500 (22,500* $230)+ (22,500* $113)

1731 (10min.) Journalentries(continuationof1730).

1732 (20min.) FIFOmethod(continuationof1730).

1733 (30min.) Transferredincosts,weightedaveragemethod(relatedto1730to1732).

(26,300* $355) + (26,300* $369) + (26,300* $168)

1734 (30min.) Transferredincosts,FIFOmethod(continuationof1733).

1735 (25min.) Weightedaveragemethod.

(500* $31)+(500* $21)

1737 (20min.) FIFOmethod(continuationof1735).

(425 $32) + (425 $22)

1738 (30min.) Transferredincosts,weightedaverage.

(3,000a $49.104) +(3,000a $8.90) + (3,000a $25)

1739 (30min.) Transferredincosts,FIFOmethod(continuationof1738).

Physical Transferredin Direct Conversion

(2,100b $52.50)+(2,100b $8.90)+(2,100b $23)

(0c $8.90) + (360c $23)

1740 (45min.) Transferredincosts,weightedaverageandFIFOmethods.

(4,000 $18.80)+(4,000 $4.80)+(4,000 $8.258)

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