CHAPTER 10 - AVERAGE AND FIFO COSTING

TRUE OR FALSE
1.
TRUE
2.
TRUE
3.
TRUE
4.
FALSE
5.
TRUE
6.
TRUE
7.
FALSE
8.
TRUE
9.
TRUE
10.
TRUE

MULTIPLE CHOICE - THEORY

1.
B
11.
C
2.
A
12.
C
3.
A
13.
C
4.
B
14.
C
5.
A
15.
D
6.
C
7.
A
8.
A
9.
D
10.
A

Problem 1
1) FIFO
Units in process, beg.
Units started

6,000
42,000
48,000
Units completed & transferred (40,000)
IP beg.
6,000
Started & completed
34,000
Units in process, end
8,000
48,000
2) AVERAGE
Units in process, beg.
6,000
Units started
42,000
48,000
Units completed
Units IP end

40,000
8,000
48,000

80% 4,800
70% 4,200
100% 34,000 100% 34,000
10%
800 15% 1,200
39,600
39,400

100% 40,000
10%
800
40,800

100%
15%

40,000
1,200
41,200

Problem 2

1) FIFO
Units in process, beg.
Units started

5,000
35,000
40,000
Units completed & transferred (30,000)
IP beg.
6,000
Started & completed
24,000
Units in process, end
10,000
40,000

85% 5,100
75% 4,500
100% 24,000 100% 24,000
20% 2,000 30%
3,000
31,100
31,500

PAGE 2
2) AVERAGE
Units in process, beg.
Units started

5,000
35,000
40,000

Units completed
Units IP end

30,000
10,000
48,000

Problem 3
1)
Units in process beg.
Units started

100% 30,000
20%
2,000
32,000

100%
30%

300
2,000
2.300

Units comp. & transf. (1,700)

IP beg.
Started & completed
Units in process, end

300
1,400
600
2,300

40%
100%
40%

120
1,400
240
1,760

70%
100%
20%

2)
Unit cost -

540
Materials 3,714/1760
Conversion 2,258/1730
6,512

=
=

2.110227
1.305202
3.415429

3) Cost of units transferred out

From IP beg.
Cost last month
Cost added Mat. ( 120 x 2.110227)
Conversion ( 210 x 1.305202)
From units started & completed (1,400 x 3.415429)

540
253
274

4) Cost of ending inventory

Materials (240 x 2.110227)
Conversion ( 120 x 1.305202)

Problem 4 1) FIFO
Units in process, beg
Units started
Units Completed ( 17,000)
IP beg.
Started & completed
Units in process, end

30,000
3,000
33,000

1,067
4,782
5,849
507
156
663

8,000
14,000
22,000
8,000
9,000
5,000
22,000

70% 5,600
100% 9,000
80% 4,000
18,600

70%
100%
40%

5,600
9,000
2,000
16,600

210
1,400
120
1,730

Page 3
Unit cost

48,240
126,852/18,000
219,120/16,600
394,212

Materials
Conversion

Completed & transf.

IP beg.
Cost labor month
Cost added (5,600 x 20.02)
Started & completed ( 9,000 x 20.02)

= 6.82
= 13.20
20.02

48,240
112,112

160,352
180,180

340,532

IP end
Materials ( 4,000 x 6.82)
Conversion ( 2,000 x 13.20)
2) AVERAGE
Units completed
Units IP end

Unit cost

27,280
26,400

17,000
5,000
22,000

53,680
394,212

100% 17,000 100% 17,000

80% 4,000 40%
2,000
21,000
19,000

Materials 16,440 + 126,852 = 6.823428

21,000
Conversion = 31800 + 219,120 = 13.206316
19,000
20.029744

Completed & transferred ( 17,000 x 20.029744)

IP end
Materials ( 4,000 x 6.823428)
Conversion (2000 x 13.206316)

340,506
27,294
26,412

53,706
394,212

Problem 5 Auto Novelties, Inc.

a. Average
1) Units in process beg.
15,000
Units started
250,000
265,000
Units completed & transf.
Units in process end

2) Unit cost

245,000
20,000
265,000

Materials

Converion

100%
100%

245,000
20,000
265,000

210,000 + 3,500,000
265,000

100% 245,000
40%
8,000
253,000

= 14.00

60,000 + 1,458,000 = 6.00

253,000
20,00

Page 4
3)
4)

Completed & transf. (245000 x 20)

IP ined
Materials ( ( 20,000 x 14)
Conversion ( 8000 x 6)

b) FIFO
1) Units completed ( 245,000)
IP beg
Started & completed
Units IP beg.

2)Unit cost:

15,000
230,000
20,000
265,000

Materials
3,500,000/250,000
Conversion 1,458000/243,000

4,900,000
280,000
48,000

328,000
5,228,000

1/3
5,000
100% 230,000 100% 230,000
100% 20,000
40% 8,000
250,000
243,000
=
=

14.00
6.00
20.00

3) Completed& transferred
From IP beg.
Cost last month
270,000
Cost added ( 5,000 x 6)
30,000
From started & completed
( 230,000 x 20)

300,000
4,600,000 4,900,000

4) IP end
Materials ( 20,000 x 14)
Conversion (8,000 x 6)

Problem 6 - Ellery Company

A) AVERAGE
1) Units IP beg.
Units started

15,500
36,000
51,500
48,000
3,500
51,500

Units completed
Units IP ed

2)

Unit cost

280,000
48,000

100%
100%

48,000
3,500
51,500

Materials 7,800 + 54,000

51,500
Conversion 20,150 + 79,000
49,575

3)

Completed & transferred ( 48,000 x 3.20)

4)

IP end
Materials ( 3,500 x 1.20)
Conversion ( 1,575) x 2.00)

100%
45%

1.20

2.00
3,20

328,000
5,228,000

48,000
1,575
49,575

153,600

4,200
3,150

7,350
160,950

Page 5
B) FIFO
1) Units IP beg
Units started

15,500
36,000
51,500

Units completed (48,000)

IP beg.
Started & completed
Units IP end

2)

Unit cost

15,500
32,500
3,500
51,500

IP beg.
27,950
Materials 54,000/36000
Conversion 79,000/39,500
160,950

3) Completed & transferred

IP beg.
Cost last month
Cost added ( 5,425 x 2)
Started & completed ( 32,500 x 3.50)

=
=

Units completed
Units IP end
Units lost normal

Unit cost
Cost from preceding dept.

35% 5,425
100% 32,500
45% 1,575
39,500

1.50
2.00
3.50

27,950
10,850
113,750

4) IP end
Materials ( 3,500 x 1.50)
Conversion ( 1,575 x 2)

Problem 7 - GDL Company

A) AVERAGE
Units IP beg
Units received

32,500
3,500
36,000

100%
100%

5,250
3,150

152,550

8,400
160,950

10,000
40,000
50,000
35,000
10,000
5,000
50,000

100%
100%

35,000
10,000
______
45,000

100%
50%

40,000 + 140,000
50,000 5,000

4.00

Materials

20,000 + 70,000
45,000

2.00

Labor

39,000 + 162,500
40,000

= 5.0375

Overhead

42,000 + 130,000
40,000

= 4.30
_____
15.3375

35,000
5,000
______
40,000

Page 6
Problem 7 continuation
Completed & transferred ( 35,000 x 15.3375)

536,812.50

IP end
Cost from prec. Dept ( 10,000 x 4)
Materials
( 10,000 x 2)
Labor
( 5,000 x 5.0375)
Overhead
( 5,000 x 4.30)

B)FIFO
Units IP beg.
Units received

40,000.00
20,000.00
25,187.50
21,500.00
106,687.50

10,000
40,000
50,000

Units completed ( 35,000)

IP beg.
10,000
Started & completed 25,000 100%
Units IP end
10,000 100%
Units lost
5,000
50,000
Unit cost
IP beg.
From preceding dept.
Materials
Labor
Overhead

1/4
2.500
100% 25,000
1/2
5,000
______
32,500

141,000
140,000/40,000 5,000
70,000/35,000
162,500/32,500
130,000/32,500
643,500

Completed & transferred *35000)

IP beg
Cost last month
Cost added ( 2.500 x 9)
Received & completed ( 25,000 x 15)

IP end
Cost from preceding dept.
Materials
Labor
Overhead

25,000
10,000
______
35,000

( 10,000 x 4)
(10,000 x 2)
( 5,000 x 5)
( 5,000 x 4)

=
=
=
=

4.00
2.00
5.00
4.00
15.00

141,000
22,500
375,000
538,500

40,000
20,000
25,000
20,000
105,000

Page 8 - Janice Manufacturing Co.

Units in process, beg.
Units received from preceding dept.

Units comp. & transf. 8,000

IP beg.
Received & completed
Units in process, end

2,000
9,000
11,000

2,000
6,000
3,000
11,000

Cost IP beg.
Cost from precedig dept.
Cost added in the dept
Materials
Labor
Overhead

50%
100%
1/3

10,250
36,000
4,000
8,000
6,000
18,000
64,250

Total costs to be accounted from

Costs accounted for as follows:
Cost of units completed & transf.
IP beg.
Cost added ( 1,000 x 2.25)
Cost & transf. (6,000 x 6.25)

10,250
2,250

1,000
6,000
1,000
8,000

P 4.00
.50
1.00
.75 .
2,25
6.25

12,500
37,500

50,000

IP end
Cost from preceding (3,000 x 4.00)
M, L, O ( 1,000 x 2.25)
Total costs as accounted for

12,000
2,250

14,250
64,250

Problem 9 Norman Corporation

AVERAGE METHOD
Units IP beg.
Units started

1,000
9,000
10,000

Units completed & transferred

Units IP end
Units lost abnormal

8,000 100% 8,000

1,500 100% 1,500
500 100% 500
10,000
10,000

100% 8,000
75% 1,125
100% 500
9,625

Cost to be accounted for

Materials
Labor
Overhead

Cost IP beg
2,520
1,540
2,800
6,860

Cost added
72,480
21,560
43,450
137,490

Unit cost
7.50
2.40
5.00
14.90

100% 8,000
50% 750
100% 500
9,250

Page 3
Cost accounted for as following
Completed & transferred ( 8,000 x 14.90)
Factory Overhead ( 500 x 14.90)
In process, end
Materials (1,500 x 7.50)
Labor ( 1,125 x 2.40)
Overhead ( 750 x 5.00)
Total costs as accounted for

119,200
7,450
11,250
2,700
3,750

17,700
144,350

Problem 9 - Norman Corporation

FIFO METHOD
Units completed & transferred
IP beg.
Started & completed
Units IP end
Units lost abnormal

Cost to be accounted for

Cost IP beg.
Cost added
Materials
Labor
Overhead

1,000
40%
400 65%
650 75% 750
7,000 100% 7,000 100% 7,000 100% 7,000
1,500 100% 1,500 75% 1,125 50% 750
500 100%
500 100% 500 100% 500
10,000
9,400
9,275
9,000

6,860
72,480
21,560
43,450
137,490
144,350

Total costs to be accounted

Costs accounted for as follows:
Completed & transferred
IP beg.
Cost last month
6,860
Cost added
M ( 400 x 7.710638)
3,084
L ( 650 x 2.324528)
1,511
O ( 750 x 4.827778)
3,621
Started & comp.(7,000 x 14.862944) 104,041___
Factory overhead control ( 500 x 14.862944)
In Process, end
Materuaks ( 1,500 x 7.710638)
11,566
Labor ( 1,125 x 2.324528)
2,615
Overhead ( 750 x 4.827778)
3,620

7.710638
2.324528
4.827778
14,862944
14,862944

119,117
7,432

17,801
144,350

Problem 10 1)
Units IP beg
Units received
Units completed
Units IP end
2)

Unit cost
Transferred in

5,000
20,000
25,000
21,000
4,000
25,000

100% 21,000
______
21,000

17,750 + 104,000
25,000

100%
30%

4.87

21,000
1,200
22,200

Materials

+ 23,100
21,000

1.10

Conversion

7,250 + 38,400
22,200

2.056306
8.026306

3) Completed ( 21,000 x 8.026306 )

4) IP end
Prec. Dept. cost (4,000 x 4.87)
Materials
Conversion ( 1,200 x 2.056306)

168,552
19,480
2,468
21,948

Problem 11 Nofat Company

1) Units IP beg.
600
Units received
3,900
4,500
Units completed
4,100
Units IP end
400
4,500
2) Units cost
From preceding department

Material A

100% 4,100
100% 400
4,500

Material B

100%

9,090 + 67,410 =
4,500

Conversion

4,100 190%
_____ 30%
4,100
17,00

Material A

4,000 + 21,200
4,500

5.60

Material B

0 + 16,400
4,100

4.00

Conversion

1,340 + 17,650 =
4,220

3) Completed ( 4,500 x31.10)

4) IP end
Cost from precede dept. ( 400 x 17.00)
Material A ( 4.00 x 5.60)
Conversion ( 120 x 4.50)

4,100
120
4,220

4.50
______
31.10
139,950
6,800
2,240
540
9,580

Page 10
Problem 12 Cross Company
Units started

10,500

Units completed
Units IP end
Lost units - normal

7,000
3,000
500
10,500

Unit cost:

Materials
Labor
Overhead

100%
100%
100%

7,000
3,000
500
10,500

52,500/10,500 =
39,770/10,100 =
31,525/10,100 =

1. Completed and transferred

Share in cost of lost units

100%
90%
80%

5.00
3.9376237
3.1212871
12.0589108

7,000 x 12.0589108

2, In process, end
Materials
3,000 x 5
Labor
2,700 x 3.93762 47
Overhead
2,700 x 3.12129871
Share in cost of lost units

Cost of lost
Materials
Labor
Overhead
Total

500 x 5.00
=
400 x 3.93762 =
400 x 3.12129 =

7,000
2,700
400
10,100

2,500
1,575
1,249
5,324

84,412
3,788
88,200

=
=
=
=

15,000
10,632
8,427
1,536
35,595

Allocation to C&T
IP end
7/10 1,750
3/10
750
70/97 1,137
27/97
438
70/97
901
27/97
348
3,788
1,536

Problem 13 - Alonzo Manufacturing

Cost IP beg.
Current cost
Total costs
Divided by equivalent prod.
Unit cost
1.

Completed & transferred

2.

Total costs to be accounted for

Less: Cost of units IP end
Costs of units completed

Materials
P 6,544
281,656
P288,200
262,000
P 1.10
( 255,200 x 2.50)

Conversion
P 16,803
344,817
P 361,620
258,300
P
1,40

Total
P 23,347
626,473
P649,820
P

2.50

P 638,000
P 649,820
11,597
P 638,223

Problem 14 - Nicole Mfg. Co.

1)
Units IP beg.
12,000
Units received
80,000
Increase in units
4,000
96,000
Units completed
Units IP end

Costs IP beg.
Current cost
Total costs
Divided by EP
Unit cost

86,000
10,000
06,000
Transf. In
P 11,800
86,120
P 97,920
96,000
P
1.02

100%
100%

86,000
10,000
96,000

Materials
P 3,125
21,835
P 24,960
96,000
P
0.26

2)

Completed & transferred ( 86,000 x 2.18)

3)

IP end

100%
2/5

Labor
P 1,490
43,510
P45,000
90,000
P 0.50

Overhead
P 1,320
34,680
P 36,000
90,000
P
0.40

Total
P 17,735
186,145
P203,880
P

2.18

P 187,480

Cost from prec. Dept (10,000 x 1.02)

Materials ( 10,000 x 0.26)
Labor ( 4,000 x 0.50)
Overhead ( 4,00 x 0.40)

Problem 15 1)
Units received.

86,000
4,000
90,000

P 10,200
2,600
2,000
1,600
P 16,400

60,000

Units completed
50,000
100%
Units IP beg.
9,000
100%
Units lost abnormal 1,000
60,000
Cost from prec. Dept.
212,400
Materials
84,370
Coversion
129,710
426,480
2)

Factory OH

3)

Completed & transf. (50,000 x 7.35)

4)

IP end

50,000
9,000
______
59,000
3.54
1.43
2.38
7.35

( 1,000 x 3.54)

Cost from prec. Dept ( 9,000 x 3.54)

Materials ( 9,000 x 1.43)
Conversion ( 4,500 x 2.38)

100%
50%

50,000
4,500
______
54,500

3,540
367,500

31,860
12,870
10,710
55.440

Problem 16 Bewitched Co.

1)

Cost per unit = 122,360/19000 = 6.44

Completed & transferred
From IP beg.
Cost last month
Cost added ( 1,000 x 1.45)
Received & completed ( 14,000 x 6.45)

Unit cost
Cost from preceding dept.
M,L,O
Units completed ( 19,000)
From IP beg.
From units received
Units IP end

2)

30,610
1,450
90,300
122.360

110,000/22,000
30,450 /21,000

5,000 1/5
1,000
14,000 100% 14,000
8,000
6,000
27,000
21,000

IP end
Cost from preceding ( 8,000 x 5)
M, L, O ( 6,000 x 1.45)

Problem 17 Nicole Company

Units IP beg.
Units received

= 5.00
= 1.45
6,45

40,000
8,700
48,700

1,400
14,000
15,400

Units Completed & transf.

Units IP end
Units lost normal
Units lost abnormal

11,200
3,500
560
140
15,400

100%
100%
100%
100%

1)

Completed & transf. ( 11,200 x 9) + (560 x 9)

2)

FOC

3)

IP end
Cost from prec dept. ( 3,500 x 5)
Materials ( 3,500 x 1)
Conversion ( 1,400 x 3)

( 140 x 9)

11,200
3,500
560
140
15,430

100% 11,200
40%
1,400
100%
560
100%
140
13,300
P 105,840
1,250

17,500
3,500
4,200
26,200

Problem 18 - Samahan Inc.

1)
Units IP end ( 500 x 50% x 1.32)

33,000

2)

Finished goods, end ( 700 x 132)

92,400

3)

From FG beg.
From units completed IP beg.
From units received and completed
Cost of goods sold

600 uittz
1,250
800
2,650

P 76,800
161,000
105600
P 343,400

Or
Total available for sale
FG beg.
600 units
Completed from IP beg.
1,250
Completed from started
1,500 x 132
Total goods available for sale
Less: FG Inventory
Cost of goods sold
Computation of equivalent production
Units IP beg.
1,250
Units started
2,000
3,250
Units completed (2,750)
IP beg.
1,250
20%
Started & completed 1,500
100%
Units IP end
500
50%
3,250
Unit cost ( 264000/2000 =

76,800
161,000
198,000
435,800
92,400
P 343,400

250
1,500
250
2,000

132.00

Completed & transferred

IP beg.
Cost last month
Cost added ( 250 x 132)
Cost of IP beg. upon completion

P 128,000
33.000
P 161,000

Units started & completed ( 1,500 x 132)

Problem 19 - Michelle Company
Department 1
Actual Materials Conversion
Started or received 60,000
Comp. & transf.
IP end

45,000
15,000
60,000

45,000
15,000
60,000

45,000
9,000
54,000

P 198,000

Department 2
Actual Materials Conversion
45,000
40,000
5,000
45,000

40,000
5,000
45,000

40,000
4,000
44,000

Costs charged to the dept.

Cost from preceding dept.
Cost added in the dept.
Materials
90,000
Labor
64,800
Overhead
59400
Total added
214,200
Total costs
214,200
Costs accounted for as follows
Comp. & transf. ( 45,000 x 3.80)
IP beg
Cost from prec dept
Mat. ( 15,000 x 1.50)
22,500
Labor ( 9,000 x 1.20)
10,800
OH ( 9,000 x 1.10)
9,900
Total costs as accounted for

1,50
1.20
1.10
3.80
3.80
171,000

43,200
214,200

Journal entries
1.
Materials
Accounts payable

180,000

Work in process Dept. 1

Work in process Dept. 2
Materials

90,000
112,500

Payroll

125,600

2.

3.

4.

5.

6.

7.

8.

125,600
64,800
61,600
2,200

Work in process Dept. 1

Work in process Dept. 2
Factory OH Applied

59,400
50,600

128,600

110,000

Work in process Dept. 2

Work in process Dept. 1

171,000

Finished goods
Work in process Dept. 2

354,000

Accounts receivable
Sales

400,000

Cost of goods sold

Finished goods
75,000 + (20,000 x 8.85)

252,000

112,500
61,600
50,600
224,700
395,700

2.50
1.40
1.15
5.05
8.85

(5,000 x 3.80) 19,000

(5,000 x 2.50) 12,500
(4,000 x 1.40) 5,600
(4,000 x 1.15) 4,600

202,500

Work in process Dept. 1

Work in process Dept. 2
Factory OH
Payroll

3.80

(40,000 x 8.85)

180,000

Accrued payroll

171,000

171,000

354,000

400000

252,000

354,000

41,700
395,700

Michelle Company
Cost of Goods sold Statement
For the month of June, 2008
Direct materials used
Materials, June 1
Purchases
Total available for use
Less: Materials, June 30
Direct labor
Factory overhead
Total manufacturing costs
Less: Work in process, June 30
Cost of goods manufactured
Finished goods, June 1
Total goods available for sale
Less: Finished goods, June 30
Cost of goods sold

Multiple choice (problems)

1. A
11. B
2. A
12. C
3. D
13 A
4. C
14. C
5. A
15. C
6. A
16 A
7. A
17. A
8. C
18. A
9. D
19. A
10. C
20. A

21. A
22. D
23. C
24. D
25. B
26 A
27. B
28. B
29 C
30. B

P 50,000
180,000
230,000
27,500 P

202,500
126,400
110,000
438,900
84,900
354,000
75,000
429,000
177,000
P 2,52,000

31, C
32.
33.
34. C
35. A