Chap 011

CHAPTER 11: PROCESS COSTING
QUESTIONS
11-1 A company that should use a process costing system typically has homogenous
products, which pass through a series of similar processes or departments.

These firms usually engage in continuous mass production of a few products .
11-2 Process costing is likely used in industries such as chemicals, oil refining,
textiles, paints, flour, canneries, rubber, steel, glass, food processing, mining,
automobile production lines, electronics, plastics, drugs, paper, lumber, leather
goods, metal products, sporting goods, cement, and watches.
11-3 Differences between job and process costing: (1) accumulating costs by job vs.
department, (2) collecting cost data using the job cost sheet vs. the production
cost report, and (3) computing unit cost by job vs. department.
11-4 Equivalent units are the number of completed units that could have been
produced given the amount of work actually performed on both complete and
partially completed units.
11-5 If direct materials are added at the beginning of the process rather than uniformly
throughout the process, we do not need to add any equivalent units of direct
materials to finish the work-in-process beginning inventory.
11-6 A production cost report is a report, which summarizes the physical units and
equivalent units of a department, the costs incurred during the period, and costs
assigned to both finished goods and work-in-process inventories. The five key
steps in preparing a production cost report are analysis of physical units,
calculation of equivalent units, determination of total costs to account for,
computation of unit costs, and assignment of total costs.
11-7 The weighted-average method equivalent units include both the units placed into
production in the current period and the units from the prior period that are still
in production at the beginning of this period. FIFO method does not include the
equivalent units of the prior period that are still in production at the beginning of
this period. Equivalent units under the weighted-average method are larger
than those under the FIFO method. They are equal only if there is no beginning
work-in-process inventory.
11-8 The weighted-average method would be inappropriate when a firms beginning
and ending inventories or manufacturing costs per unit change dramatically from
period to period.
Solutions Manual
11-1
11-9 The advantage of the weighted-average method is its simplicity.

11-10 From the standpoint of cost control, the FIFO method is superior to weightedaverage because the cost per equivalent unit under FIFO represents the cost for
the current periods efforts only. It is impossible to monitor cost trends using the
weighted-average method because the costs of the prior period and the current
period are mixed together.
11-11 Transferred-in costs are costs of work done in the prior department that are
transferred into the current department.
11-12 Work-in-Process Inventory -- Second Department
Work-in-Process Inventory -- First Department
xxx
xxx
11-13 Under the FIFO method of handling units transferred out, beginning inventory
cost, the cost added in this period to complete the beginning inventory, and the
cost of units started and completed are considered separately.
11-14 Under the weighted-average method, it makes no difference when a product is

started; all units completed in the same period or in the ending inventory of
that period are treated the same. In computing the equivalent units, this
method looks at only the output of the production process. In calculating the
unit cost, this method considers both the beginning work-in-process cost and
the current period cost.
11-15 Process costing uses the same manufacturing accounts as job costing. Journal
entries are essentially the same as in job costing. However, instead of tracing
product costs to specific jobs, process costing accumulates costs in production
departments or cost centers.
11-16 Operation costing is a hybrid costing system that uses job costing to assign
direct materials costs, and uses process costing to assign conversion costs to
products or services.
11-17 Automation will reduce the difference of unit costs between the weightedaverage cost method and the FIFO cost method.
Blocher,Chen,Cokins,Lin: Cost Management 3e 11-2
The McGraw-Hill Companies, Inc., 2005
EXERCISES
11-18 Physical Units (20 min)
1. Work-in-process inventory, 2/1
80,000
Units started
60,000
Total units to account for
140,000
Units completed
(75,000)
Work-in-process inventory, 2/28
65,000
2. Units completed
Total units accounted for
Units started
Work-in-process Inventory, 6/1
83,000
55,000
138,000
(75,000)
63,000
3. Units completed
Units started
7,300
3,400
10,700
(5,500)
5,200

45,000
Units started
57,000
102,000
(23,000)
Units completed
79,000
Solutions Manual
11-3
11-19 Equivalent Units; Weighted-Average Method (15 min)

Units started
Units completed and transferred out
1,500
6,500
8,000
(2,300)
5,700
2. Equivalent units -- Weighted-Average Method

Materials:
Units completed
Work-in-process inventory, 5/31 2,300 x 50% =
Total equivalent units
5,700
1,150
6,850
Conversion:
Units completed
5,700
690
6,390
11-20 Equivalent Units; Weighted-Average Method (20 min)

Quantity Schedule
Input
Units started
30,000
150,000
180,000
Output
Units completed
Work in process inventory, 12/31
165,000
15,000
180,000
Equivalent Units -- Weighted-Average Method

Materials
Units completed
165,000
Work-in-process inventory,12/31 15,000 x 70% = 10,500
175,500
Conversion:
Units completed
165,000
Work-in-process inventory,12/31 15,000 x 60% =
9,000
174,000
Solutions Manual
11-5
11-21 Equivalent Units; FIFO Method (25 min)

Quantity Schedule (not required)
Input
Units started
3,000,000
4,850,000
7,850,000
Output
Units completed
5,450,000
2,400,000
7,850,000
Equivalent Units -- FIFO Method

Direct Materials
Units completed
Work-in-process inventory(9/30),
Total
Equivalent units
5,450,000
2,400,000 x 100% =
2,400,000
7,850,000
3,000,000 x 100% = (3,000,000)
4,850,000
Conversion:
Units completed
Total
Equivalent units
5,450,000
2,400,000 x 80% =
1,920,000
7,370,000
3,000,000 x 25% =
(750,000)
6,620,000
11-22 Equivalent Units; FIFO Method (25 min)

Physical Percent
Units Complete
Work-in-process 12/1 200
9%
Units started
900
Total units to account 1,100
Units completed
by 12/31
800
Work-in-process,12/31 300
Total units accounted 1,100
Less: equivalent units in
work-in-process, 12/1
FIFO equivalent units
Solutions Manual
100%
12%
9%
11-7
Equivalent Units
DM
Conversion
800
300
1,100
800
36
836
200
900
18
818
11-23 Equivalent Units; FIFO Unit Cost (25 min)

Physical Percent Equivalent Units
Units Complete DM Conversion
WIP, June 1
30,000
20%
Units started
50,000
Total units to account 80,000
Units completed and
transferred out
60,000
WIP, June 30
20,000
Total units accounted 80,000
Total
Less: EU in June 1 WIP
100% 60,000
70% 20,000
80,000
20% (30,000)
50,000
60,000
14,000
74,000
(6,000)
68,000
Computation of unit costs:
Total Materials Conversion

WIP, June 1
$104,000
Cost incurred during June 415,000 $150,000
$265,000
Total cost to acct. for
$519,000
Divided by equivalent units
Cost per equivalent unit
$6.90
50,000
$3.00
68,000
$3.90
11-24 Journal Entries (10 min)

1. Work-in-Process Inventory - Department 1
Materials Inventory
Accrued Payroll
Factory Overhead Applied
555,000
55,000
160,000
340,000
2. Work-in-Process Inventory - Department 2 850,000

Work-in-Process Inventory - Department 1
850,000
3. Work-in-Process Inventory - Department 2

Materials Inventory
Accrued Payroll
Factory Overhead Applied
32,000
320,000
250,000
602,000
4. Finished Goods Inventory

740,000
Work-in-Process Inventory - Department 2
Solutions Manual
11-9
740,000
11-25 FIFO Method (25 min)

1. Equivalent units
Returns completed during March
1,200*
Returns in process, 3/31: 200 x 90% = 180
- Returns in process, 2/1: 100 x 30% = (30)
1,350
* 100 + 1,300 - 200 = 1,200
2. Cost per equivalent unit
$148,500 / 1,350 = $110
3. Cost of completed returns
From beginning inventory, 3/1:
$ 330
Added to finish the beginning
inventory: $110 x 100 x (1 - 30%) =
7,700
Total first batch
$ 8,030
Second batch--started and finished:
$110 x (1,200 - 100) =
121,000
Total cost of completed returns
$129,030
4. Cost of returns in process on March 31
$110 x (200 x 90%) = $19,800
11-26 Equivalent Units; Weighted-Average Method and FIFO

(15 Min)
1. Equivalent units -- Weighted-Average Method
Direct Materials:
Units completed 1,000 + 3,000 =
4,000
Work-in-process, 11/30 2,000 x 100% = 2,000
6,000
Conversion:
4,000
Work-in-process, 11/30 2,000 x 20% = 400
4,400
2. Equivalent Units -- FIFO Method
Direct Materials
4,000
Work-in-process, 11/30 2,000 x 100% = 2,000
Total
6,000
Work-in-process, 11/1 1,000 x 100% = (1,000)
Equivalent units
5,000
Conversion:
Work-in-process, 11/30 2,000 x 20% =
Total
Work-in-process, 11/1 1,000 x 60% =
Equivalent units
Solutions Manual
11-11
4,000
400
4,400
( 600)
3,800
PROBLEMS
11.27 Weighted-Average Method (25-30 min)
1. Quantity Schedule (not required)
Input
Units started
Output
Units completed
0
25,000
25,000
23,000
2,000
25,000
Equivalent Units -- Weighted-Average Method:

Direct Materials
Units completed
Conversion:
Units completed
23,000
2,000
25,000
23,000
24,200
1,200
Costs per equivalent unit:

Costs
Direct Materials Conversion Total
Work-in-process, 3/1 $
0
$
0
$
0
Costs added
162,500
133,100 295,600
Total
$162,500
$133,100 $295,600
Divided by EU
25,000
24,200
= Unit cost
$6.50
$5.50
$12.00
2. Cost of units completed and transferred out:
$12 x 23,000 =
$276,000
3. Cost of ending work-in-process:
Direct materials $6.50 x 2,000 = $ 13,000
Conversion $5.50 x 1,200 =
6,600
$ 19,600
11-28: Weighted Average Method
(20 min)
QUANTITY RECAP: PHYSICAL UNITS

Beginning WIP
Units started
TOTAL IN Process
Units Finished or Trans-out
Normal spoilage
Abnormal spoilage
Ending WIP
TOTAL OUT Process
Whole
Units
Materials Conversion
3,000
100%
50%
7,000
10,000
8,500
1,500
100%
50%
10,000
EQUIVALENT UNITS: Weighted Average

Transferred In
Materials
10,000 =8,500+1.0 x 1,500
Conversion
9,250 =8,500+ .5 x 1,500
EQUIVALENT UNITS: FIFO
Transferred In
Materials
7,000 =10,000-1 x 3,000
Conversion
7,750 =9,250- .5 x 3,000
COST ADDED
Beginning WIP
Current Costs
TOTAL
-----This Dept----Trans-in Materials Conversion

32,000
44,000
240,000
189,000
272,000
233,000
Weighted Average Cost per EU

FIFO
Cost per EU
$ 27.200
$ 34.286

(see above)
Solutions Manual
11-13
$
$
25.189
24.387
Total
76,000
429,000
505,000
$
$
52.389
58.673
11-30 Weighted-Average Method (30-40 min)

Input
Units started
27,000
60,000
87,000
Output
Units completed
70,000
17,000
87,000
Equivalent Units:
Material X
Units completed
70,000
Work-in-process inventory, 8/31 17,000 x 100% = 17,000
87,000
Material Y
Units completed
70,000
0
70,000
Conversion
Units completed
70,000
6,800
76,800
2. Costs per equivalent unit:

Costs
Material X Material Y Conversion
Total
WIP, 8/1
$ 64,800 $ 89,100 $119,880 $273,780
Costs added 152,700
138,400
302,520
593,620
Total
$217,500 $227,500 $422,400 $867,400
EU
87,000
70,000
76,800
Unit cost
$2.50
$3.25
$5.50
$11.25
Problem 11-30: (Continued)

3. Cost of units transferred out:

($2.50 + $3.25 + $5.50) x 70,000 = $787,500
4. Cost of ending work-in-process inventory:
Material X $2.50 x 17,000 =
$ 42,500
Material Y
0
37,400
$ 79,900
Solutions Manual
11-15
11-31 FIFO Method -- (40 min)

1. Quantity schedule
Units
Input:
Work-in-process inventory, May 1
3,000
Units started
69,000
72,000
Output:
Units completed and transferred out:
From work-in-process inventory, May 1
3,000
Units started and completed
65,000
4,000
72,000
Units completed
Work-in-process, May 31:
DM 4,000 x 100% =
CON 4,000 x 60% =
Total
Less: EU in WIP, May 1:
DM 3,000 x 100% =
CON 3,000 x 40% =
Cost added during May
Divided by EU
= Unit cost
(=68,000 3,000)
Equivalent Units
Direct Materials
Conversion
68,000
68,000
4,000
72,000
( 3,000)
69,000
$ 172,500
69,000
$2.50
2,400
70,400
(1,200)
69,200
$224,900*
69,200
$3.25
* Cost of units transferred out

$393,400
Less: Cost of WIP, May 1
( 13,800)
DM started and completed cost
$2.50 x 65,000 =
( 162,500)
Conversion cost of units completed $ 217,100
$217,100 / (3,000 x 60% + 65,000) = $3.25 Unit conversion cost
$3.25 x 69,200 = $224,900 Conversion cost added during May
Problem 11-31 (Continued)
2. Cost reconciliation:
Cost Incurred
Cost added during May
Total cost to account for
$ 13,800
397,400*
$411,200
* $172,500 + $224,900 = $397,400

Cost Assignment
Cost of units completed:
Work-in-process inventory, May 1 $ 13,800
Cost to complete WIP:
3,000 x 60% x $3.25 =
5,850
Started and completed units:
65,000 x ($2.50 + $3.25) =
373,750 $ 393,400
Cost of work-in-process inventory, May 31:
Direct materials 4,000 x $2.50 =
$10,000
Conversion 4,000 x 60% x $3.25 =
7,800
17,800
Total cost accounted for
$411,200
Solutions Manual
11-17
11-32 Weighted-Average Method (30 min)

1. Equivalent units:
Direct Materials: 175,000 + (30,000 x 80%) = 199,000
Conversion: 175,000 + (30,000 x 40%) = 187,000
2. Cost per equivalent unit:
Direct Materials:
(57,000 renminbi + 736,000 renminbi) / 199,000 = 3.9849 renminbi
Conversion:
(45,000 renminbi + 1,094,950 renminbi) / 187,000 = 6.096 renminbi
Total unit costs: 3.9849 + 6.096 = 10.0809 renminbi
3. Cost of goods completed and transferred out:
10.0809 x 175,000 = 1,764,157.50 renminbi
4. Cost of work-in-process, 10/31:
Direct Materials:
3.9849 x 30,000 x 80% = 95,637.60 renminbi
Conversion:
6.096 x 30,000 x 40% = 73,152.00 renminbi
Total: 95,637.60 + 73,152.00 = 168,789.60 renminbi
5. Exchange rate depends on a particular date, which an instructor
selected.
The exchange rate as on April 7, 2003 was $1 US = 8.27627 CNY
11-33 Weighted-Average Method; Transferred in Units (25 min)

Whole
Equivalent Units
Units
4,000
0%
50%
21,000
25,000
19,000
6,000
0%
50%
25,000

Beginning WIP
Units started or Trans-in
TOTAL IN Process
Normal spoilage
Abnormal spoilage
Ending WIP
TOTAL OUT Process
Transferred In
Materials
Conversion
25,000
19,000 = finished units + % complete x End WIP
22,000 = finished units + % complete x End WIP
Cost Added:
Trans-in
Beginning WIP
Current Costs
Total
Cost per EU
-----This Dept----Materials Conversion
25,000
100,000
125,000
$
0
30,000
30,000
5.000 $
COST SUMMARY - WEIGHTED AVERAGE

Finished Goods
19,000 units
Good production
161,273
Normal spoilage
Total
Ending WIP
Trans-in
Materials
Conversion
Total
Total Cost to Account For
Solutions Manual
1.579 $
5,000
37,000
42,000
30,000
167,000
197,000
1.909 $ 8.488
161,273
6,000 units
30,000
5,727
35,727
197,000
11-19
Total
11-34 Weighted Average Method (25 min)

1. 3.
11-34 Weighted Average Method (continued)

4. The request is a violation of the controllers responsibility to prepare
accurate production cost reports. The ethical principles of integrity and
objectivity require the controller to use the best available estimate of
percentage completion.

(see solution for 11-34 above)
Solutions Manual
11-21
11-36
FIFO Method; Journal Entries (50-60 min)

Beginning WIP
TOTAL IN Process
Normal spoilage
Abnormal spoilage
Ending WIP
TOTAL OUT Process
EQUIVALENT UNITS: FIFO
Materials
Conversion
Cost Added:
FIFO
Whole
Equivalent Units
Units
200,000
100%
80%
1,000,000
1,200,000
900,000
300,000
100%
50%
1,200,000
1,000,000 =weighted average EUs - % completion x Beginning WIP

890,000 =weighted average EUs - % completion x Beginning WIP
-----This Dept----Materials Conversion*
Total
Beginning WIP
200,000
504,000
704,000
Current Costs
1,300,000
3,192,000 4,492,000
Total
1,500,000
3,696,000 5,196,000
Cost per EU
$ 1.3000 $ 3.5865 $ 4.8865
(*Note Coversion costs are labor +60% applied overhead)
COST SUMMARY - FIFO

Finished Goods
900,000 units
Prior period costs in Beginning WIP
Cost to complete Beg WIP (200,000 x .2 x $3.5865)
Cost of units started and finished (@ $4.8865)
Total
Ending WIP
Materials
Conversion
Total
704,000
143,461
3,420,562
4,268,022
300,000 units
390,000
537,978
927,978
5,196,000
Problem 11-36 (continued)

Adjusting journal entries:
1. To update the amount of the ending work-in-process inventory:
Work-in-Process Inventory
267,018
Cost of Goods Sold
267,018
where $927,978 - $660,960 = $267,018
2. To update the amount of the ending finished goods inventory:
Cost of Goods Sold
16,250
Finished Goods Inventory
16,250
where $4.8865 x 100,000 = $488,650
$504,900 - $488,650 = $16,250
Solutions Manual
11-23
11-37 Weighted-Average Method; Transferred-In Costs (40-50 min)

1.
Beginning WIP
TOTAL IN Process
Normal spoilage
Abnormal spoilage
Ending WIP
TOTAL OUT Process
Whole
Equivalent Units
Units
4,000
100%
80%
15,000
19,000
16,000
3,000
19,000

Transferred In
19,000
Materials
18,700
Conversion
17,800
Cost Added:
Trans-in
Beginning WIP
Current Costs
Total
WTAVG
Cost per EU
90%
= finished units + spoiled units + % completion x Ending WIP

= finished units + spoiled units + % completion x Ending WIP
-----This Dept----Materials Conversion
57,800
141,700
199,500
$
60%
23,400
93,475
116,875
10.500 $

Finished Goods
16,000 units
Good production (@ $24.25)
Total
Ending WIP
3,000 units
Trans-in (3,000 x $10.50)
Materials (3,000 x .9 x $6.25)
Conversion (3,000 x . 6 x $7.50)
Total
6.250 $
23,360
110,140
133,500
Total
104,560
345,315
449,875
7.500 $ 24.250
388,000
31,500
16,875
13,500
61,875
449,875
2. Exchange rate depends on a particular date, which an instructor

selected. On April 6, 2003, the exchange rate was $1 US = 1,257
Korean Won (KRW)
11- 38 (Appendix B) FIFO Method; Transferred-In Costs (30 min)

1. The equivalent units of production schedule for the Packaging
Departments October activity is as follows.
Equivalent Units
Whole Quilted
Direct
Units Wrap
Boxes Labor Overhead
To complete beginning
WIP inventory
10,000
10,000 6,000
6,000
Started and completed 30,000 30,000 30,000 30,000
30,000
Ending WIP inventory 10,000 10,000 10,000 8,000
8,000
Equivalent units
40,000 50,000 44,000
44,000
2. Cost per equivalent unit of October production is as follows.
October Costs / Equivalent Units = Unit Costs
Quilted Wrap
$80,000
40,000
$2.00
Boxes
50,000
50,000
1.00
Direct labor
22,000
44,000
0.50
Applied overhead
66,000
44,000
1.50
Equivalent unit cost
$5.00
3. If $5,000 is considered an immaterial amount for Wood Glow
Manufacturing, the additional overhead incurred would be charged (an
increase) to the cost of goods sold for the month of October. If $5,000
is material, the underapplied overhead should be prorated among the
cost of goods sold, work-in-process inventory, and finished goods
inventory (increasing each account).
Solutions Manual
11-25

Input
Units started
15,000
80,000
95,000
Output
Units completed
70,000
25,000
95,000
Equivalent Units -- FIFO Method:

Material A
Units completed
70,000
Total
95,000
Less: EU in WIP inventory, 6/1 15,000 x 100% = (15,000)
80,000
Material B
Units completed
70,000
Total
95,000
Less: EU in WIP inventory, 6/1 15,000 x 0% =
(
0)
95,000
Conversion:
Units completed
70,000
Total
86,250
Less: EU in WIP inventory, 6/1 15,000 x 40% = ( 6,000)
80,250
.
11-39 (Continued)
2. Costs per equivalent unit:
Costs
Material A Material B Conversion
Costs incurred in June
$260,000 $403,750 $461,437.50
Divided by EU
80,000
95,000
80,250
Unit cost
$3.25
$4.25
$5.75
3. Cost of units transferred out:
Work-in-process inventory, June 1
$ 85,437.50
Cost to finish beginning WIP:
Material B 15,000 x $4.25 =
$63,750
Conversion 15,000 x 60% x $5.75 = 51,750 115,500.00
Total
$200,937.50
Cost of units started and completed:
($3.25 + $4.25 + $5.75) x (70,000 - 15,000) = 728,750.00
Cost of units transferred out
$929,687.50
4. Cost of ending work-in-process inventory:
Material A $3.25 x 25,000 =
Material B $4.25 x 25,000 =
Solutions Manual
11-27
$ 81,250.00
106,250.00
93,437.50
$280,937.50
11-40 Weighted-Average Method; Two Departments (50 min)

1. 54,000; 51,600
2. $2.4537; $6.4118; $8.8655
3. 50,000 x $8.8655 = $443,276
4. $20,074
5. 60,000; 57,000
6. $8.9213; $ 16.20
7. $1,381,670
8. $77,006
For calculations supporting the above answers, see the following cost
reports:
11- 40 (continued)
Fabrication Department Cost Report
Beginning WIP
TOTAL IN Process
Normal spoilage
Abnormal spoilage
Ending WIP
TOTAL OUT Process
Whole
Equivalent Units
Units
6,000
100%
20%
48,000
54,000
50,000
4,000
100%
40%
54,000

Materials
Conversion
Cost Added:
54,000 = Trans out + spoiled units + % completion x End WIP

Materials
Beginning WIP
Current Costs
Total
WTAVG
15,000
117,500
132,500
Cost per EU
$ 2.4537

Transferred Out
50,000 units
Good production
443,276
Normal spoilage
Total
Ending WIP
4,000 units
Trans-in
Materials
9,815
Conversion
10,259
Total
Solutions Manual
Conversion
11-29
Total
20,000
310,850
330,850
35,000
428,350
463,350
6.4118
$ 8.8655
443,276
20,074
463,350

Cost Report for Assembly Department
Beginning WIP
TOTAL IN Process
Normal spoilage
Abnormal spoilage
Ending WIP
TOTAL OUT Process
Whole
Equivalent Units
Units
10,000
0%
40%
50,000
60,000
55,000
5,000
0%
40%
60,000

Transferred In
60,000
Conversion
Cost Added:

-----This Dept----Trans In Materials Conversion
Total
Beginning WIP
Current Costs
Total
WTAVG
Cost per EU
92,000
443,276
535,276
$
8.9213
292,000
1,166,676
1,458,676
$ 16.2000 $ 25.1213

Finished Goods
55,000 units
Good production
1,381,670
Normal spoilage
Total
Ending WIP
5,000 units
Trans-in
44,606
Materials
Conversion
32,400
Total
200,000
723,400
923,400
1,381,670
77,006
1,458,676
11-41 (Appendix B) FIFO Method; Two Departments (60-70 min)

Production Report - Molding Department (FIFO Method)
Physical Percent
Equivalent Units
Units Complete
DM
Conv
WIP, January 1
0
Units started during Jan.50,000
Total units to acct. for 50,000
Units completed & transferred
out during Jan.
50,000
WIP, January 31
0
Total units acct. for
50,000
100%
Weighted average equivalent units

Less: equivalent units in Jan.1 WIP
Costs:
DM
WIP, January 1
$
0
Costs incurred during Jan. 300,000
Total costs to acct. for
$300,000
Costs per equivalent unit
50,000
$6.00
50,000
50,000
50,000
0
50,000
50,000
0
50,000
0
50,000
$50,000
Total
$
0
350,000
$350,000
50,000
$1.00
$7.00
Conv
Cost of goods completed and transferred out of the molding department

during January:
Cost of January 1 WIP inventory $ 0
Cost incurred to produce units that were both started and completed during
January:
( # of units ) x ( total cost per equivalent unit ) = 50,000 x $7.00 = $350,000
Total cost of goods completed and transferred out: $350,000
Cost remaining in January 31 WIP Inventory in the molding department: $ 0
Solutions Manual
11-31
Problem 11-41 (Continued 1)

Production Report - Finishing Department (FIFO Method)
Physical Percent
Equivalent Units
Units
Complete
DM
Conv
WIP, January 1
5,000
25%
Units transferred in
during Jan.
50,000
Total units to acct. for 55,000
Units completed and
transferred out
during January
WIP, January 31
Total units acct. for
53,000
2,000
55,000
100%
25%
Weighted-average equivalent units

Less: equivalent units in Jan.1 WIP
Costs:
WIP, January 1
Costs incurred during Jan.
Total costs to acct. for
Costs per equivalent unit
Trans.In
$350,000
50,000
$7.00
53,000
2,000
53,000
500
55,000
53,500
(5,000)
( 1,250)
50,000
52,250
Conv
Total
$15,000
$40,000 390,000
$405,000
52,250
$0.7656
$7.7656
Cost of goods completed and transferred out of the finishing department

during January:
Cost of Jan. 1 WIP Inv., which is transferred out first: $15,000
Cost incurred to finish the Jan.1 WIP Inv.:
(# of units) x (% of conversion remaining) x (cost per equivalent unit of
conversion) = 5,000 x 0.75 x $0.7656 = $2,871
Problem 11-41 (Continued 2)

Cost incurred to produce units that were both started and completed during
Jan.:
(# of units) x (total cost per equivalent unit)
= (53,000 - 5,000) x $7.7656 = $372,748.80
Total cost of goods completed and transferred out:
= $15,000 + $2,871 + $372,748.80 = $390,619.80
Cost remaining in Jan.31 WIP inventory in the finishing department:
Transferred-in costs:
(# of equivalent units of transferred-in cost) x (transferred-in cost per
equivalent unit) = 2,000 x $7.00 = $14,000
Conversion:
(# of equivalent units of conversion.) x (Conversion cost per equivalent
unit)
= 500 x $0.7656 = $382.80
Total cost of Jan.31 WIP inventory: $14,382.80
Check: Cost of goods completed & transferred out
Cost of Jan.31 WIP Inv.
Total costs accounted for
* $2.60 difference due to rounding
Solutions Manual
11-33
$390,619.80
14,382.80
$405,002.60*
11-42 Weighted-Average Method; FIFO Method (70-80 min)

1.
Porter Company -- Department A

FIFO Production Cost Report
----------------------------------------------------------------------------------------Production Quantity Information
(Step 1)
(Step 2)
Equivalent Units
Percent
Direct
Conversion
Input
Units Complete Materials Costs
Work-in-process,
beginning inventory
500
30%
Started this period
1,500
Total units to account for 2,000
Output
Completed
1,600
1,600
1,600
Work-in-process,
ending inventory
400
20%
400
80
Total units accounted for 2,000
Total work done to date
2,000
1,680
- Work-in-process,
beginning inventory
500
30%
( 500)
(150)
Total work done this period
1,500
1,530
(Total equivalent units)
Cost Added
(Step 3)
Direct
Conversion
Costs Incurred
Total
Materials
Costs
Work-in-process,
beginning inventory
$ 4,530
Current cost
22,710
$12,000
$10,710
Total costs
to account for
$27,240
Step 4
Cost per equivalent unit $15.00
$8.00
= $12,000/ 1,500
$7.00
= $10,710/ 1,530
11-42 (Continued 1)
(Step 5)
Cost Assignment
Direct
Total
Materials
Units Completed:
From work-in-process,
beginning inventory $ 4,530
Current costs incurred
completing units
2,450 = 500 x 70% x $7
Total cost from beginning
inventory
$ 6,980
Units started and completed
this period
16,500 = (1,600-500) x $15
Total cost of units
completed
$23,480
Work-in-process,
(400x$8)
ending inventory
3,760
$3,200
Total costs acct. for $27,240
Solutions Manual
11-35
Conversion
Costs
(80x$7)
$560

2.
Porter Company -- Department B

Weighted-Average Production Cost Report
----------------------------------------------------------------------------------------Production Quantity Information
(Step 1)
(Step 2)
Equivalent Units
Percent Transferred Direct Conversion
Input
Complete
-In
Materials Costs
Work-in-process, 4/1
300 40%
Transferred-in
1,600
Total units to
account for
1,900
Output
Completed
1,400
1,400
1,400
1,400
Work-in-process, 4/30 500
70%
TI 500 x 100% =
500
DM 500 x 100% =
500
CON 500 x 70% =
350
Total units
accounted for
1,900
Total work done to date
1,900
1,900
1,750
(Total equivalent units)
Unit Cost Determination
(Step 3)
Transferred
Direct
Conversion
Costs Incurred
Total
-In
Materials
Costs
-------------------------------------------------Work-in-process, 4/1 $6,100
$ 4,200*
$ 0
$1,900**
Current costs
85,830
23,480
38,000
24,350
Total costs to
account for
$91,930
$27,680
$38,000
$26,250
(Step 4)
Cost per unit
$49.568
($27,680/
1,900)
$14.568
($38,000/
1,900)
$20.00
($26,250/
1,750)
$15.00
* $14 x 300 = $4,200

** $6,100 - $4,200 = $1,900
(Step 5)
Units completed
Work-in-process,
4/30
Total costs
accounted for
Solutions Manual
Cost Assignment
$69,395.20 = 1,400 x $ 49.568
($14.568
($20.00
x 500)
x 500)
22,534.00
$7,284
$10,000
$91,929.20
11-37
($15.00
x 350)
$5,250
11-43 (Appendix A: Spoilage) Weighted-Average Method;

Transferred-In Costs (15-20 min)
1. Cost of goods finished and transferred out
Finished goods: $9 x 11,200 = $100,800
Normal spoilage: $9 x 560 =
5,040
Cost of goods finished
$105,840
2. Cost of the ending work-in-process inventory
Units: 1,400 + 14,000 - 700 - 11,200 = 3,500
Costs:
[($5 + $1) x 3,500] + [$3 x (3,500 x 40%)] = $25,200
3. Total cost transferred in during May
$ 5 x 15,400 - $6,300 = $70,700
4. Abnormal spoilage cost
$9 x (700 - 560) = $1,260
11-44 Appendix A: Spoilage (30 Min)

1. The revised cost production report for November 2004 as follows.
Romano Foods- Mixing Department
Revised Production Cost Report
Month ended November 30, 2004
Input
Units
120,000
Good
10%
Good
Total
Output Normal Abnormal
Unit
Costs
Units Spoilage Spoilage
Cost
$45,360
107,000 10,700 2,300
$0.4158
Budgeted unit cost

Actual cost per good unit
Favorable variance
$.4350
.4158
$.0192
Cost Reconciliation
Cost of 107,000 good units at $.4158
Abnormal spoilage (2,300 X $.378)
Total production costs
$44,490.60
869.40
$45,360.00
Supporting Calculations
a. 10% of good output = units of normal spoilage
.10 X 107,000 units = 10,700 units of normal spoilage
b. Total spoilage
13,000
Less normal spoilage10,700
Abnormal spoilage
2,300
c. Total cost of November production
Divide by total input (units)
Unit cost of production
$45,360
120,000
$ .378
Problem 11-44 (Continued)

Good units completed
Solutions Manual
$40,446.00
11-39
(107,000 X $.378)
Normal spoilage
(10,700 X $.378)
Total cost of good units
Units cost of good units
($44,490.60/107,000)
d. Abnormal spoilage (units)
Multiplied by unit cost of production
Total cost of abnormal spoilage
4,044.60
$44,490.60
$ .4158
2,300
.378
$869.40
2. The journal entry, required to transfer November costs of the Mixing

Department to the Assembly Department, charges the cost of good
production to the Assembly Department, charges a loss account for
abnormal spoilage, and credits the Mixing Department with the total
cost of production.
Debit
Credit
Work in process Assembly
$ 44,490.60
Loss from Abnormal spoilage
869.40
Work in process Mixing
$45,360.00
3.
Corolla's report is less favorable than the revised report because he

ignored the normal spoilage in calculating the unit cost. In addition, he
miscalculated normal spoilage as ten percent of total input rather than
ten percent of good output and , thus, miscalculated abnormal
spoilage. Corolla divided the November production costs ($45,360) by
the good units produced plus the incorrect amount of abnormal
spoilage (107,000 + 1,000 = 108,000) to get the $.42 per unit. By
ignoring the equivalent units of the normal spoilage, he used a higher
base for calculating the unit cost. Normal spoilage should always be
incorporated into the equivalent unit calculation to get an accurate
representation of the unit cost.
11-45 Weighted Average Process Costing; Spoilage (50-60 min)

Beginning WIP
TOTAL IN Process
Normal spoilage
Abnormal spoilage
Ending WIP
TOTAL OUT Process
Whole
Equivalent Units
Units
4,000
100%
25%
21,000
25,000
20,000
500
500
4,000
100%
80%
25,000

Materials
Conversion
25,000 = trans out + spoiled units + % completion x End WIP

24,200 = trans out + spoiled units + % completion x End WIP
Cost Added:
Beginning WIP
Current Costs
Total
WTAVG
Cost per EU
45,600
228,400
274,000
$ 10.960 $

Finished Goods
20,000 units
Good production (@ $13.176)
263,518
Normal spoilage (500 x $13.176)
6,588
Total
Abnormal Spoilage
(500 x $13.176)
Ending WIP
Materials (4,000 x $10.96)
Conversion (4000 x .8 x $2.216)
Total
Solutions Manual
8,125
45,500
53,625
2.216 $
Total
53,725
273,900
327,625
13.176
270,106
500 units
6,588
4,000 units
43,840
7,091
50,931
327,625
11-41
11-46 Appendix A: Spoilage; Weighted-Average Method;

Transferred-in Costs (40 Min)
1. Physical quantity schedule
Beginning WIP
Bikes transferred in
Bikes to account for
3,000
45,000
48,000
Bikes transferred out 40,000

Ending WIP
4,000
Bikes lost
4,000
Bikes accounted for
48,000
a. Normal amount of defective or spoiled bikes

Bikes passing through assembly
48,000
Less:
Bikes not inspected during current year
Beginning work-in-process inventory
(inspected in prior year 80% complete) 3,000
Ending work-in-process inventory
(have not reached inspection point
20% complete)
4,000 7,000
Bikes that reached inspection point
41,000
Normal defective/spoiled rate
.05
Normal amount of defective/spoiled bikes
2,050
b. Abnormal amount of defective/spoiled bikes
Total bikes lost
Normal amount of defective/spoiled bikes
Abnormal amount of defective/spoiled bikes
4,000
2,050
1,950

2. Equivalent units of production
a.
Transferredin from
Molding
40,000
Units transferred out

Equivalent units in
ending work-in-process
4,000 x 100%
c.
Assembly
Conversion
40,000
4,000
4,000 x 50%
4,000 x 20%
Equivalent units lost
4,000 x 100%
4,000 x 70%
b.
Assembly
Material
40,000
2,000
4,000
4,000
48,000
46,000
800
2,800
43,600
3. Cost per equivalent unit for fully assembled dirt bike
Total
Prior
Current
Cost per
Period Period
Total Equivalent Equivalent
Cost
Cost
Cost
Units
Unit
Transferred in $82,200 $1,237,800 $1,320,000 48,000 $27.50
Materials
6,660
96,840
103,500 46,000
2.25
Conversion
11,930
236,590
248,520 43,600
5.70
$35.45
4. The total production cost:
a. Normal defective/spoiled bikes
Transferred-in
2,050 x $27.50 = $56,375.00
Material
2,050 x 2.25 =
4,612.50
Conversion
2,050 x .7 x 5.70 = 8,179.50
$69,167.00
Solutions Manual
11-43

b. Abnormal defective/spoiled bikes
Transferred-in
1,950 x $27.50 = $53,625.00
Material
1,950 x 2.25 = 4,387.50
Conversion
1,950 x .7x
5.70 = 7,780.50
$65,793.00
c. Good bikes completed in the
Assembly Department
40,000 bikes x $35.45 =
d. Ending work-in-process
Transferred-in
Conversion
Total costs accounted for
$ 1,418,000.00
4,000 x $27.50 = $110,000.00
2,000 x 2.25 =
4,500.00
800 x 5.70 =
4,560.00
$ 119,060.00
$1,672,020.00
5. a. The cost of the normal spoiled units of $69,167 would be

transferred to the Packing Department as a portion of the cost
of the 40,000 good units transferred out. Thus, this amount
would be a portion of the Packing Departments inventory
account and/or cost of goods sold amount depending upon the
proportion of the units in the work-in-process inventory, finished
goods inventory, and units sold during the year.
b. The abnormal losses of $65,793 would appear as a period
expense on the companys income statement.
c. The cost of the good units completed and transferred to the
Packing Department ($1,418,000) would be included in the Packing
Departments production costs. Thus, this amount would be a
portion of the Packing Departments inventory accounts and/or cost
of goods sold account depending upon the proportion of the units in
the work-in-process inventory, finished goods inventory, and units
sold during the year.
11-47 Process Costing and Activity Based Costing

1.
Whole
Equivalent Units
QUANTITY RECAP: PHYSICAL UNITS Units (000s) Materials
Conversion
Beginning WIP
200
100%
60%
1,000
TOTAL IN Process
1,200
800
Normal spoilage
Abnormal spoilage
Ending WIP
400
100%
30%
TOTAL OUT Process
1,200
Total Number of Batches
Materials
Conversion
1,200
920
Cost Added:
Materials
WTAVG
Total
Beginning WIP
Current Costs
Total
55,000
176,000
231,000
7,250
66,900
74,150
Cost per EU; Cost per batch $
192.500 $
80.598 $ 273.098

Finished Goods
Good production
Ending WIP
Materials
Conversion
62,250
242,900
305,150
800 gallons
218,478
400 gallons
77,000
9,672
Solutions Manual
Conversion
86,672
305,150
11-45

2.
Whole
Equivalent Units
Number of
QUANTITY RECAP: PHYSICAL
UnitsUNITS
(000s) Materials
Conversion Batches
Beginning WIP
200
100%
60%
1,000
TOTAL IN Process
1,200
800
25
Normal spoilage
Abnormal spoilage
Ending WIP
400
100%
30%
75
TOTAL OUT Process
1,200
Total Number of Batches
100
Materials
1,200
Conversion
920
Cost Added:
Materials
Beginning WIP
Current Costs
Total
WTAVG
Conversion Batch
55,000
176,000
231,000
Cost per EU; Cost

$ 192.500
per batch $
7,250
38,400
45,650
28,500
28,500
49.620
285.00 $ 242.120

Finished Goods
800 gallons
Good production 193,696
Batch Costs
7,125
Ending WIP
Materials
Conversion
Batch costs
Total
400 gallons
77,000
5,954
21,375
62,250
242,900
305,150
200,821
104,329
305,150

Ted is apparently correct about the under-costing of ending working process.
The activity-based method, which separates the batch-related costs from
the other conversion costs, shows $104,329 ending work in process,
$17,657 (or 20%) greater than the conventional costing of
$86,672. This analysis also has implications for costing and pricing the
smaller orders, which require the same batch-level costs of $285 per batch
as for the larger orders.
Solutions Manual
11-47

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CHAPTER 11: PROCESS COSTING

products, which pass through a series of similar processes or departments.

11-8 The weighted-average method would be inappropriate when a firms beginning

11-9 The advantage of the weighted-average method is its simplicity.

11-12 Work-in-Process Inventory -- Second Department

Work-in-Process Inventory -- First Department

11-14 Under the weighted-average method, it makes no difference when a product is

Blocher,Chen,Cokins,Lin: Cost Management 3e 11-2

The McGraw-Hill Companies, Inc., 2005

4. Work-in-process inventory, 11/1

11-19 Equivalent Units; Weighted-Average Method (15 min)

2. Equivalent units -- Weighted-Average Method

Blocher,Chen,Cokins,Lin: Cost Management 3e 11-4

The McGraw-Hill Companies, Inc., 2005

11-20 Equivalent Units; Weighted-Average Method (20 min)

Equivalent Units -- Weighted-Average Method

11-21 Equivalent Units; FIFO Method (25 min)

Equivalent Units -- FIFO Method

Blocher,Chen,Cokins,Lin: Cost Management 3e 11-6

The McGraw-Hill Companies, Inc., 2005

11-22 Equivalent Units; FIFO Method (25 min)

11-23 Equivalent Units; FIFO Unit Cost (25 min)

Computation of unit costs:

Total Materials Conversion

Blocher,Chen,Cokins,Lin: Cost Management 3e 11-8

The McGraw-Hill Companies, Inc., 2005

11-24 Journal Entries (10 min)

2. Work-in-Process Inventory - Department 2 850,000

3. Work-in-Process Inventory - Department 2

4. Finished Goods Inventory

11-25 FIFO Method (25 min)

Blocher,Chen,Cokins,Lin: Cost Management 3e 11-10

The McGraw-Hill Companies, Inc., 2005

11-26 Equivalent Units; Weighted-Average Method and FIFO

Equivalent Units -- Weighted-Average Method:

Costs per equivalent unit:

Blocher,Chen,Cokins,Lin: Cost Management 3e 11-12

The McGraw-Hill Companies, Inc., 2005

11-28: Weighted Average Method

QUANTITY RECAP: PHYSICAL UNITS

EQUIVALENT UNITS: Weighted Average

-----This Dept----Trans-in Materials Conversion

Weighted Average Cost per EU

11-29 FIFO Method (20 min)

11-30 Weighted-Average Method (30-40 min)

2. Costs per equivalent unit:

Problem 11-30: (Continued)

The McGraw-Hill Companies, Inc., 2005

3. Cost of units transferred out:

11-31 FIFO Method -- (40 min)

* Cost of units transferred out

The McGraw-Hill Companies, Inc., 2005

* $172,500 + $224,900 = $397,400

11-32 Weighted-Average Method (30 min)

Blocher,Chen,Cokins,Lin: Cost Management 3e 11-18

The McGraw-Hill Companies, Inc., 2005

11-33 Weighted-Average Method; Transferred in Units (25 min)

QUANTITY RECAP: PHYSICAL UNITS

-----This Dept----Materials Conversion

COST SUMMARY - WEIGHTED AVERAGE

11-34 Weighted Average Method (25 min)

Blocher,Chen,Cokins,Lin: Cost Management 3e 11-20

The McGraw-Hill Companies, Inc., 2005

11-34 Weighted Average Method (continued)