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UNIVERSITY OF THE WEST INDIES Open Campus

ACCT 1003 - INTRO. TO COST & MANAGEMENT ACCOUNTING

Worksheet #5 Process Costing Selected solutions

Study Questions

Question 1
i) ii) iii) iv) Cost per completed unit $12.00 Value of units completed and transferred to FG $51,600 Value of unexpected losses $2,400 Manufacturers true loss $1,400 Dr WIP-Process A/C Cr Material Inventory Cr Manufacturing Wages Cr Manufacturing Overhead $56,500 $22,000 14,000 20,500

v) Journal Entries

To assign materials, labour & overheads to Process

Question 2
i) Equivalent Units: Direct Materials 8,000 & Conversion Costs 7,710. CPU Direct Materials $1.30 CPU Conversion Costs $0.90 Total Cost of Units Transferred to Packing $14,410 Total Cost of Ending WIP Fermenting $2,929 Journal Entries Dr WIP-Fermenting A/C Cr Material Inventory Cr Manufacturing Wages Cr Manufacturing Overhead $17,339 $10,400 2,000 4,539

ii)

iii)

To assign materials, labour & overheads to Process


iv) Journal Entries Dr WIP-Packing A/C Cr WIP Fermenting A/C $14,410 $14,410

To transfer cost from Fermenting to Packing


Ending Balance $2,929

Question 3
From P.1 i) Prepare T Account ii) Equivalent Units iii) CPU 19,000 $20.00 DM Added 17,000 $16.00 Conversion Costs 15,600 $24.00

Cost per completed unit = $60.00


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Cost of Finished Goods $780,000 Abnormal Losses $89,600 Ending WIP $156,800 iv) Amount Transferred to P&L A/C v) Journal Entries Dr WIP-Process 2 Cr WIP Process 1 Cr Material Inventory Cr Manufacturing Wages Cr Manufacturing Overhead $49,600

$1,046,400 $400,000 272,000 254,000 120,400 $780,000 $780,000

To assign materials, labour & overheads to Process 2


Dr WIP-Process 3 Cr WIP Process 2

To transfer cost from Process 2 to Process 3

Discussion Questions
Question 1
Part (i) Calculating OARs Dept. W Indirect Costs $17,600 Re-app. B's costs 3,150 Re-app. A's, costs 5,500 Total Budgeted O/Hs $26,250 Department W = Department X = Department Y = Part (ii) Process W A/C Material input 7,000 $ 68,000 Normal loss Material added 6,000 Abnormal loss Labour cost 24,700 (500 @ $8.75) _____ Overheads 4,375 To Process X 7,000 103,075 CPU Process W = $103,075/ (7,000 - 350) = $15.50 Process X A/C $ 99,975 Normal loss 10,400 20,220 2,275 132,870 2,090 To FG 134,960 350 200 15.50 6,450 15.50 7,000 $ 0 3,100 Dept. X $15,650 3,600 2,200 $21,450 Dept. Y $14,100 1,350 3,300 $18,750 Dept. A $10,100 900 ($11,000) Dept. B $9,000 ($9,000)

$26,250/3,000 hours = $8.75/hour $21,450/3,300 hours = $6.50/hour $18,750/3,750 hours = $5.00/hour

99,975 103,075

From Process W Material Added Labour Cost Overheads Abnormal Gain

6,450

645

$8.00

$5,160

(350 @ $6.50) 95 6,545

5,900 $22.00 6,545

129,800 134,960
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CPU Process X = ($132,870- $5,160)/ (6,450 - 645) = $22.00 Hence cost of order processed during May is $129,800. Part (iii) Unrealized Scrap Sales (95 @ $8) Abnormal Gain A/C $ 760 Process X A/C 95 $2,090 ______ 2,090

P&L A/C
Part (iv)

1,330
2,090

Calculating Overhead Variances


Overheads Applied Dept. W Dept. X 3,500 @ $8.75=$30,625 3,000 @ $6.50= $19,500 Actual Overhead Cost Incurred $35,000 $16,500 Variance $35,000 $30,625 = $4,375 under-applied $19,500 - $16,500 = $3,000 over-applied

Question 2
i) Equivalent Units: Wood 3,000; Adhesives 1,950 & Conversion Costs 2,370. CPU Wood $0.90 CPU Adhesives $0.70 CPU Conversion Costs $1.30 Total Cost of Units Transferred to Compression $5,655 Total Cost of Ending WIP Preparation $1,491 Journal Entries Dr WIP-Compression A/C Cr WIP Preparation A/C $5,655 $5,655

ii)

iii)

To transfer cost from Preparation to Compression


iv) Ending Balance $1,491

Question 3
Equivalent Units Total Cost CPU Input Material RM Added Direct Wages Production Overhead 4,850 4,610 4,370 4,150 $194,000 $92,200 $65,550 $74,700 $40 $20 $15 $18

Cost per completed unit = $93 Cost Evaluations Abnormal Loss = $7,360 Finished Goods = $365,490 WIP c/d = $53,600
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