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defective units.
spoiled units.
miscellaneous expense.
a reduction of overhead.
ANSWER:
2.
ANSWER:
EASY
A unit that is rejected at a quality control inspection point, but that can be reworked and
sold, is referred to as a
a.
b.
c.
d.
spoiled unit.
scrap unit.
abnormal unit.
defective unit.
ANSWER:
4.
EASY
3.
EASY
ANSWER:
EASY
71
72
5.
Chapter 7
The cost of abnormal losses (net of disposal costs) should be written off as
a.
b.
c.
d.
Product cost
yes
yes
no
no
ANSWER:
6.
Abnormal loss
yes
yes
no
no
ANSWER:
EASY
Normal loss
yes
no
no
yes
EASY
If abnormal spoilage occurs in a job order costing system, has a material dollar value, and
is related to a specific job, the recovery value of the spoiled goods should be
a.
b.
c.
d.
debited to
a scrap inventory account
the specific job in process
a loss account
factory overhead
ANSWER:
8.
Period cost
no
yes
yes
no
Which of the following would fall within the range of tolerance for a production cycle?
a.
b.
c.
d.
7.
credited to
the specific job in process
overhead
the specific job in process
sales
MEDIUM
If normal spoilage is detected at an inspection point within the process (rather than at the
end), the cost of that spoilage should be
a.
b.
c.
d.
included with the cost of the units sold during the period.
included with the cost of the units completed in that department during the period.
allocated to ending work in process units and units transferred out based on their
relative values.
allocated to the good units that have passed the inspection point.
ANSWER:
MEDIUM
Chapter 7
9.
A continuous loss
a.
b.
c.
d.
ANSWER:
10.
EASY
ANSWER:
MEDIUM
ANSWER:
13.
EASY
ANSWER:
12.
11.
73
EASY
When the cost of good units are increased and lost units are not included in an equivalent
unit schedule, these units are considered
a.
b.
c.
d.
ANSWER:
EASY
74
14.
Chapter 7
The net cost of normal spoilage in a job order costing system in which spoilage is common
to all jobs should be
a.
b.
c.
d.
ANSWER:
15.
MEDIUM
ANSWER:
EASY
ANSWER:
17.
Normal spoilage is
a.
b.
c.
d.
16.
EASY
When normal spoilage is discovered at a discrete inspection point and the degree of
completion of ending work in process has not reached the level of completion of the
inspection point, normal spoilage is handled by
a.
b.
c.
d.
prorating the spoilage cost between units transferred out and units in ending work
in process.
extending the spoiled units to the EUP schedule.
assigning the normal spoilage costs to the units transferred out and those in
beginning inventory.
both b and c.
ANSWER:
MEDIUM
Chapter 7
18.
In a job order costing system, the net cost of normal spoilage is equal to
a.
b.
c.
d.
ANSWER:
19.
Beginning
Inventory
no
yes
no
yes
ANSWER:
MEDIUM
Ending
Inventory
yes
yes
no
no
Units Started
& Completed
yes
yes
yes
no
MEDIUM
absorbed by all units past the inspection point on an equivalent unit basis.
absorbed by all units in ending inventory.
considered a period cost.
written off as a loss on an equivalent unit basis.
ANSWER:
21.
Taylor Co. has a production process in which the inspection point is at 65 percent of
conversion. The beginning inventory for July was 35 percent complete and ending
inventory was 80 percent complete. Normal spoilage costs would be assigned to which of
the following groups of units, using FIFO costing?
a.
b.
c.
d.
20.
75
EASY
equivalent units for the spoilage are shown in the EUP schedule.
its cost, if normal, should be assigned to the units transferred out.
its cost, if abnormal, should be assigned to the good units produced.
both a and c.
ANSWER:
EASY
76
22.
Chapter 7
When the cost of lost units must be assigned, and those same units must be included in an
equivalent unit schedule, these units are considered
a.
b.
c.
d.
ANSWER:
23.
MEDIUM
ANSWER:
EASY
Which of the following accounts is credited when abnormal spoilage is written off in an
actual cost system?
a.
b.
c.
d.
Miscellaneous Revenue
Loss from Spoilage
Finished Goods
Work in Process
ANSWER:
25.
Abnormal spoilage is
a.
b.
c.
d.
24.
EASY
Abnormal spoilage
yes
yes
no
no
ANSWER:
EASY
Normal spoilage
yes
no
yes
no
Chapter 7
26.
continuous
yes
no
yes
no
ANSWER:
27.
good units
yes
no
yes
no
ANSWER:
EASY
lost units
yes
no
no
yes
EASY
ANSWER:
29.
discrete
no
no
yes
yes
28.
77
EASY
Which of the following statements is false? The cost of rework on defective units, if
a.
b.
c.
d.
ANSWER:
MEDIUM
78
30.
Chapter 7
ANSWER:
31.
MEDIUM
accretion.
reworked units.
complex procedure.
undetected spoilage.
ANSWER:
EASY
When material added in a successor department increases the number of units, the
a.
b.
c.
d.
ANSWER:
33.
32.
EASY
Which of the following is not a question that needs to be answered in regard to quality
control?
a.
b.
c.
d.
ANSWER:
MEDIUM
Chapter 7
34.
In regard to spoilage, management should be most concerned with which of the following?
a.
b.
c.
d.
ANSWER:
EASY
80,000 units
7,500 units
1,100 units
900 units
13,000 units
72,500 units
$10,400
13,800
$120,000
350,000
All materials are added at the start of production and the inspection point is at the end of the
process.
35.
79
80,000
79,100
78,900
87,500
ANSWER:
MEDIUM
710
36.
Chapter 7
What are equivalent units of production for conversion costs using FIFO?
a.
b.
c.
d.
79,700
79,500
81,100
80,600
ANSWER:
37.
EASY
What are equivalent units of production for conversion costs using weighted average?
a.
b.
c.
d.
83,600
82,700
82,500
81,600
ANSWER:
EASY
$1.63
$1.37
$1.50
$1.56
ANSWER:
40.
MEDIUM
86,600
87,500
86,400
85,500
ANSWER:
39.
What are equivalent units of production for material using weighted average?
a.
b.
c.
d.
38.
EASY
What is cost per equivalent unit for conversion costs using FIFO?
a.
b.
c.
d.
$4.00
$4.19
$4.34
$4.38
ANSWER:
EASY
Chapter 7
41.
What is cost per equivalent unit for material using weighted average?
a.
b.
c.
d.
$1.49
$1.63
$1.56
$1.44
ANSWER:
42.
$4.19
$4.41
$4.55
$4.35
ANSWER:
EASY
$75,920
$58,994
$56,420
$53,144
ANSWER:
MEDIUM
$1,350
$3,906
$5,256
$6,424
ANSWER:
45.
44.
EASY
What is cost per equivalent unit for conversion costs using weighted average?
a.
b.
c.
d.
43.
MEDIUM
What is the cost assigned to normal spoilage and how is it classified using weighted
average?
a.
b.
c.
d.
ANSWER:
MEDIUM
711
712
46.
Chapter 7
What is the total cost assigned to goods transferred out using weighted average?
a.
b.
c.
d.
$435,080
$429,824
$428,656
$423,400
ANSWER:
DIFFICULT
14,500 units
75,000 units
16,000
2,500
5,000
66,000
units
units
units
units
82,000
89,500
84,500
70,000
ANSWER:
48.
EASY
Using weighted average, what are equivalent units for conversion costs?
a.
b.
c.
d.
80,600
78,100
83,100
75,600
ANSWER:
EASY
Chapter 7
49.
What is the cost per equivalent unit for material using weighted average?
a.
b.
c.
d.
$1.72
$1.62
$1.77
$2.07
ANSWER:
50.
$4.62
$4.21
$4.48
$4.34
ANSWER:
MEDIUM
$31,000
$15,500
$30,850
none of the above
ANSWER:
EASY
Assume that the cost per EUP for material and conversion are $1.75 and $4.55,
respectively. What is the cost assigned to ending Work in Process?
a.
b.
c.
d.
$100,800
$87,430
$103,180
$71,680
ANSWER:
53.
52.
MEDIUM
What is the cost per equivalent unit for conversion costs using weighted average?
a.
b.
c.
d.
51.
EASY
75,000
72,500
84,500
70,000
ANSWER:
EASY
713
714
54.
Chapter 7
72,225
67,225
69,725
78,100
ANSWER:
55.
EASY
$1.42
$1.66
$1.71
$1.60
ANSWER:
EASY
Using FIFO, what is the cost per equivalent unit for conversion costs?
a.
b.
c.
d.
$4.46
$4.15
$4.30
$3.84
ANSWER:
57.
Using FIFO, what is the cost per equivalent unit for material?
a.
b.
c.
d.
56.
EASY
Assume that the FIFO EUP cost for material and conversion are $1.50 and $4.75,
respectively. Using FIFO what is the total cost assigned to the units transferred out?
a.
b.
c.
d.
$414,194
$339,094
$445,444
$396,975
ANSWER:
DIFFICULT
Chapter 7
715
100,000
20,000
3,500
5,000
14,500
97,000
units
units
units
units
units
units
All materials are added at the start of the production process. T Co. inspects goods at 75 percent
completion as to conversion.
58.
100,000
96,500
95,000
120,000
ANSWER:
59.
MEDIUM
What are equivalent units of production for conversion costs, assuming FIFO?
a.
b.
c.
d.
108,900
103,900
108,650
106,525
ANSWER:
60.
MEDIUM
Assume that the costs per EUP for material and conversion are $1.00 and $1.50,
respectively. What is the amount of the period cost for July using FIFO?
a.
b.
c.
d.
$0
$9,375
$10,625
$12,500
ANSWER:
MEDIUM
716
61.
Chapter 7
Assume that the costs per EUP for material and conversion are $1.00 and $1.50,
respectively. Using FIFO, what is the total cost assigned to the transferred-out units
(rounded to the nearest dollar)?
a.
b.
c.
d.
$245,750
$244,438
$237,000
$224,938
ANSWER:
62.
DIFFICULT
107,000
116,500
120,000
115,000
ANSWER:
EASY
What are equivalent units of production for conversion costs assuming weighted average
is used?
a.
b.
c.
d.
113,525
114,400
114,775
115,650
ANSWER:
64.
What are equivalent units of production for material assuming weighted average is used?
a.
b.
c.
d.
63.
EASY
Assume that the costs per EUP for material and conversion are $1.00 and $1.50,
respectively. What is the cost assigned to normal spoilage, using weighted average, and
where is it assigned?
a.
b.
c.
d.
Value
$7,437.50
$7,437.50
$8,750.00
$8,750.00
ANSWER:
Assigned To
Units transferred out and EI
Units transferred out
Units transferred out and EI
Units transferred out
EASY
Chapter 7
65.
Assume that the costs per EUP for material and conversion are $1.00 and $1.50,
respectively. Assuming that weighted average is used, what is the cost assigned to ending
inventory?
a.
b.
c.
d.
$29,725.00
$37,162.50
$38,475.00
$36,250.00
ANSWER:
66.
EASY
ANSWER:
EASY
World-class companies
a.
b.
c.
d.
ANSWER:
68.
67.
717
MEDIUM
ANSWER:
EASY
718
69.
Chapter 7
Variation elimination
no
no
yes
yes
ANSWER:
70.
JIT Inventory
no
yes
yes
no
MEDIUM
ANSWER:
71.
MEDIUM
Which of the following would be the most likely cause of an increase in the number of
units in a department?
a.
b.
c.
d.
Bulk packaging
Expansion of material
Heat processing
All of the above
ANSWER:
MEDIUM
SHORT ANSWER/PROBLEMS
1.
Chapter 7
2.
719
3.
4.
720
Chapter 7
8,000
35,000
6,000
2,500
15,000
19,500
units
units
units
units
units
units
Chapter 7
5.
721
BWIP
S&C
EWIP
Norm
Abnorm.
Acctd. for
8,000
11,500
15,000
6,000
2,500
43,000
Material
0
11,500
15,000
0
2,500
29,000
$ 86,355
22,650
174,995
$ 284,000
CC
1,600
11,500
8,250
0
2,500
23,850
722
6.
Chapter 7
TO
EWIP
Norm
Abnorm.
Acctd. for
19,500
15,000
6,000
2,500
43,000
Material
19,500
15,000
0
2,500
37,000
$25,950
59,978
Transferred Out
$284,000 85,928 22,500 =
Total costs accounted for
MEDIUM
$ 85,928
22,500
175,572
$ 284,000
CC
19,500
8,250
0
2,500
30,250
Chapter 7
7.
723
MJ Company manufactures picture frames of all sizes and shapes and uses a job order
costing system. There is always some spoilage in each production run. The following costs
relate to the current run:
Estimated overhead (exclusive of spoilage)
Spoilage (estimated)
Sales value of spoiled frames
Labor hours
$160,000
$ 25,000
$ 11,500
100,000
The actual cost of a spoiled picture frame is $7.00. During the year 170 frames are
considered spoiled. Each spoiled frame can be sold for $4. The spoilage is considered a
part of all jobs.
a.
b.
c.
Labor hours are used to determine the predetermined overhead rate. What is the
predetermined overhead rate per direct labor hour?
Prepare the journal entry needed to record the spoilage.
Prepare the journal entry if the spoilage relates only to Job #12 rather than being a
part of all production runs.
ANSWER:
a.
b.
680
510
680
c.
MEDIUM
1,190
680
724
8.
Chapter 7
5,000 gallons
5,500
1,200
1,700 gallons
9,000
1,000
9,700
10,500
15,000
12,400
54,000
11,000
98,000
$ 210,600
Prepare a cost of production report for September 2001. The company uses weighted
average.
Chapter 7
ANSWER:
725
BWIP
Trans. In
Fruit
Acctble. For
5,000
5,500
1,200
11,700
TO
EWIP
AS
TI
9,000
1,700
1,000
11,700
Fruit
9,000
1,700
1,000
11,700
Container
9,000
0
0
9,000
CC
9,000
1,020
980
11,000
TI
$ 9,700
12,400
$22,100
11,700
$1.89
Fruit
$10,500
54,000
$64,500
11,700
$5.51
Container
$
0
11,000
$11,000
9,000
$1.22
CC
$ 15,000
98,000
$113,000
11,000
$10.27
Costs:
BWIP
Current
EUP
Per unit
Cost Assignment:
EWIP
1,700 $1.89 =
$ 3,213
1,700 $5.51 =
9,367
1,020 $10.27 =
10,475
Spoilage
1,000 $1.89 =
$ 1,890
1,000 $5.51 =
5,510
980 $10.27 =
10,065
Transferred Out
$210,600 23,055 17,465 =
Total accounted for
MEDIUM
$ 23,055
17,465
170,080
$ 210,600
726
9.
Chapter 7
In Dept 1 material is added at the beginning, in Dept 2 material is added at the end.
Normal losses in Department 1 should not exceed 5 percent of the units started; losses are
found at an inspection point located 70 percent of the way through the production
process. The normal loss in Department 2 is 3 percent of the units transferred in; losses
are determined at an inspection point at the end of the production process.
The following production and cost data are available for January 2001.
PRODUCTION RECORDS
(IN UNITS)
Beginning inventory
Started or transferred in
Ending inventory
Spoiled units
Transferred out
Dept. 1
6,000
150,000
18,000
9,000
?
Dept. 2
3,000
?
15,000
6,000
111,000
COST RECORD
Beginning inventory
Preceding department
Material
Conversion
Current period:
Preceding department
Material
Conversion
n/a
$3,000
2,334
$6,690
0
504
n/a
$36,000
208,962
$230,910*
740
52,920
*This is not the amount derived from your calculations. Use this amount so that you do
not carry forward any possible cost errors from Department 1.
The beginning and ending inventory units in Department 1 are, respectively, 10 percent
and 60 percent complete as to conversion. In Department 2, the beginning and ending
units are, respectively, 40 percent and 80 percent complete as to conversion.
Assume spoilage in Department 1 is continuous and discrete in Department 2. Use FIFO
in Department 1 and weighted average in Department 2.
Chapter 7
727
ANSWER:
Complete
+ Equiv End
+ Abn Loss
Equiv Beg
EP
Department 1
Mat
CC
129,000
129,000
18,000
10,800
1,500
1,050
148,500
140,850
(6,000 )
(600)
142,500
140,250
Unit Cost
+ Norm Loss
EP
Unit Cost
TI
TI
111,000
15,000
2,130
3,870
132,000
Department 2
.
Mat
CC
111,000 111,000
0
12,000
2,130
2,130
3,870
3,870
117,000 129,000
Mat
$36,000 = $0.25
142,500
Mat
$740 = $0.01
117,000
CC
$208,962 = $1.49
140,250
CC
End WIP
End WIP
ABN Loss
1,500 $0.25 =
1,050 $1.49 =
ABN Loss
2,130 $2.22 =
$ 375
1,565
$1,940
COGM (Department 1)
$ 250,296 20,592 1,940 = $ 227,764
DIFFICULT
$4,729
COGM (Department 2)
$291,764 $31,920 $4,729 = $255,115
728
10.
Chapter 7
Material
$ 30,000
885,120
$915,120
UNITS
Beginning inventory (30% completeconversion)
Started
Completed
Ending inventory (70% completeconversion)
Normal spoilage
Conversion
$ 3,600
335,088
$338,688
Total
33,600
1,220,208
$1,253,808
6,000
180,000
152,000
20,000
4,800
units
units
units
units
units
Required: Find ending WIP inventory, abnormal loss, and COGM. Assume that, for
conversion costs, abnormal shrinkage is 60 percent.
Chapter 7
729
ANSWER:
Units Complete
+ Equivalents Ending WIP
+ Abnormal Loss
= Equivalent ProductionWA
= Equivalent Begin WIP
= Equivalent ProductionFIFO
Mat
152,000
20,000
9,200
181,200
(6,000)
175,200
Unit Costs:
WA
Mat
$915,120 = $5.05
181,200
FIFO
Mat
CC
CC
$338,688 = $1.97
171,520
Ending WIP
Material 20,000 $5.05
CC
14,000 $1.97
Abnormal Spoilage
Material 9,200 $5.05
CC
5,520 $1.97
$101,000
27,580
$128,580
$ 46,460
10,874
$ 57,334
CC
152,000
14,000
5,520 (9,200 .6)
171,520
(1,800)
169,720
$885,120 = $5.05
175,200
$335,088 = $1.97
169,720
730
11.
Chapter 7
Department 2 adds material (packaging) at the 75 percent completion point; this material
does not cause an increase in the number of units being processed. A quality control
inspection takes place when the goods are 80 percent complete. Spoilage should not
exceed 5 percent of the units transferred in from Department 1.
The following production cost data are applicable for operations for May 2001:
Department 1 Production Data
Beginning inventory (65% complete)
Units started
Units completed
Units in ending inventory (40% complete)
Department 1 Cost Data
Beginning inventory:
Material
Conversion
Current period:
Material
Conversion
Total costs to account for
Department 2 Production Data
Beginning inventory (90% complete)
Units transferred in
Units completed
Units in ending inventory (20% complete)
Department 2 Cost Data
Beginning inventory:
Transferred in
Material
Conversion
Current period:
Transferred in
Material`
1,000
25,000
22,000
2,800
$1,550
2,300
$3,850
$38,080
78,645
116,725
$120,575
8,000
22,000
24,000
4,500
$40,800
24,000
4,320
$113,700*
53,775
$ 69,120
Chapter 7
Conversion
Total costs to account for
731
11,079
178,554
$247,674
*This may not be the same amount determined for Department 1; ignore any difference
and use this figure.
Required:
a.
Compute the equivalent units of production in each department.
b.
Determine the cost per equivalent unit in each department and compute the cost
transferred out, the cost in ending inventory, and the cost of spoilage (if necessary).
ANSWER:
a.
1
Mat
CC
Mat =
$38,080
23,800
$1.60
$78,645
22,470
Complete
+ End WIP
22,000
2,800
24,800
22,000
1,120 (2,800 4)
23,120
CC =
$3.50
Beg WIP
(1,000 )
23,800
$ 4,480
3.920
$ 8,400
TI
Mat
CC
24,000
4,500
1,100
400
30,000
24,000
0
1,100
400
25,500
24,000
900
880
320
26,100
End WIP
4,500 $5.15
900 $0.59
$23,175
531
$23,706
Mat =
$ 77,775
25,500
= $3.05
CC =
$ 15,399
26,100
= $0.59
TI =
$154,500
30,000
= $5.15
Abn Loss
400 $3.05
320 $0.59
400 $5.15
$1,220
189
2,060
$3,469
732
MEDIUM
Chapter 7
Chapter 7
12.
733
Consider the following data for a cooking department for the month of January:
Physical
Units
Work in process, beginning inventory*
Started during current period
To account for
Good units completed and transferred out during current period:
From beginning work in process
Started and completed
Good units completed
Spoiled units
Work in process, ending inventory~
Accounted for
11,000
74,000
85,000
11,000
50,000
61,000
8,000
16,000
85,000
$220,000
30,000
$ 250,000
1,480,000
942,000
$2,672,000
Required: Prepare a detailed cost of production report. Use the FIFO method.
Distinguish between normal and abnormal spoilage.
734
Chapter 7
ANSWER:
Normal Sp = 11% 61,000 = 6,710 units FIFO
Abnormal Sp = 8,000 6,710 = 1,290 units
Mat
Complete
+ End
+ Ab Sp
Ave
Beg
FIFO
61,000
16,000
1,290
78,290
(11,000)
67,290
CC
61,000
12,000
1,290
74,290
(2,750 )
71,540
Mat =
$1,480,000
67,290
= $22.00
CC =
$942,000
71,540
= 13.17
$35.17
WIP
Material 16,000 $22.00
CC
12,000 $13.17
Loss = 1,290 $35.17
COGM = $2,672,000 510,040 45,369 = $2,116,591
MEDIUM
$352,000
158,040
$510,040
45,369
Chapter 7
13.
735
In the Lamination Department, varnish is added when the goods are 60 percent complete
as to overhead. The units that are spoiled during processing are found upon inspection at
the end of production. Spoilage is considered discrete.
Production Data for March 2001
Beginning inventory (80% complete as to labor,
70% complete as to overhead)
Transferred in during month
Ending inventory (40% complete as to labor,
20% complete as to overhead)
Normal spoilage (found during final quality inspection)
1,000 units
7,450 units
1,500 units
100 units
200 units
$7,510
950
2,194
5,522
$ 16,176
$68,540
7,015
23,000
56,782
155,337
$171,513
Required: Determine the proper disposition of the March costs for the Laminating
Department using the weighted average method.
736
Chapter 7
ANSWER:
TI
6,650
1,500
100
200
8,450
Complete
+ end
+ normal
+ abnormal
Unit Cost
$76,050 = $9
8,450
End WIP
DL
MOH
TI
Abnormal Loss
DL
MOH
TI
MAT
6,650
0
100
0
6,750
MOH
6,650
300
100
30
7,080
600 $3.40
300 $8.80
1,500 $9.00
= $ 2,040
=
2,640
= 13,500
$18,180
60 $3.40
30 $8.80
200 $9.00
= $ 204
=
264
=
1,800
$ 2,268
DL
6,650
600
100
60
7,410
Chapter 7
14.
737
Tons of Shad employs a weighted average process costing system for its products. One
product passes through three departments (Molding, Assembly, and Finishing) during
production. The following activity took place in the Finishing Department during March
2001:
Units in beginning inventory
Units transferred in from Assembly
Units spoiled
Good units transferred out
4,200
42,000
2,100
33,600
The costs per equivalent unit of production for each cost failure area as follows:
Cost of prior departments
Raw material
Conversion
Total cost per EUP
$5.00
1.00
3.00
$9.00
Raw material is added at the beginning of the Finishing process without changing the
number of units being processed. Work in process inventory was 40 percent complete as
to conversion on March 31. All spoilage was discovered at final inspection. Of the total
units spoiled, 1,680 were within normal limits.
Required:
a.
Calculate the equivalent units of production
b.
Determine the cost of units transferred out of Finishing
c.
Determine the cost of ending Work in Process Inventory
d.
The portion of the total transferred in cost associated with beginning Work in
Process Inventory amounted to $18,900. What is the current period cost that was
transferred in from Assembly to Finishing?
e.
Determine the cost associated with abnormal spoilage for the month.
738
Chapter 7
ANSWER:
a.
TI
33,600
10,500
1,680
420
46,200
Complete
+ Equiv WIP
+ Normal Sp
+ Abnor Sp
b.
33,600 $9
1,680 $9
$302,400
15,120
$317,520
c.
10,500 $5
10,500 $1
4,200 $3
$52,500
10,500
12,600
$75,600
Mat
33,600
10,500
1,680
420
46,200
TC = 46,200 $5
46,200 $1
39,900 $3
$5 = $18,900 + X
46,200
X = $231,000 18,900 = $212,100
e.
MEDIUM
CC
33,600
4,200
1,680
420
39,900
$231,000
46,200
119,700
$396,900
Chapter 7
15.
739
Department 2 adds new material to the units received from Department 1 at the end of
process. A normal loss occurs early in processing. Production and cost data for
Department 2 for the month of September are as follows:
Production record (in units):
In process, September 1
75% complete for processing cost
Received from Department 1
Completed and transferred to finished goods
Lost in processing (normal)
In process, September 30
2/3 complete for process cost
Cost Record:
Work in process inventory, September 1:
Preceding department cost
Processing cost
Cost from preceding department in September
Material cost for September
Processing cost for September
4,000
20,000
16,000
2,000
6,000
$ 620
2,000
$2,620
1,800
4,800
10,200
Required: Determine the following for Department 2 under (a) weighted average the
method of costing and (b) the FIFO method of costing: (1) unit costs for each cost
component, (2) cost of production transferred to finished goods, (3) cost of work in
process inventory of September 30.
740
Chapter 7
ANSWER:
Equivalent production
Units complete
+ Equiv. ending WIP
= Equiv. prod. average
Equiv. begin. WIP
= Equiv. prod. FIFO
Unit Cost Average
TI = $620 + 1,800
22,000
Mat = $4,800
16,000
CC = $2,000 + 10,200
20,000
End. WIPWA
PD 6,000 $0.11 =
CC 4,000 $0.61 =
TI
16,000
6,000
22,000
(4,000 )
18,000
Material
16,000
0
16,000
0
16,000
Conv. cost
16,000
4,000
20,000
(3,000 )
17,000
= $0.11
= $0.10
= $0.30
Mat = $4,800
16,000
= $0.30
= $0.61
CC = $10,200
17,000
= $0.60
$ 660.00
2,440.00
$3,100.00
End. WIPFIFO
6,000 $0.10 =
$ 600.00
4,000 $0.60 =
2,400.00
$3,000.00
$16,320.00
FIFO
$19,420 3,000 = $16,420.00
Chapter 7
16.
741
The formula for a chemical compound requires one pound of Chemical X and one pound
of Chemical Y. In the simplest sense, one pound of Chemical X is processed in
Department A and transferred to Department B for further processing where one pound of
Chemical Y is added when the process is 50 percent complete. When the processing is
complete in Department B, the finished compound is transferred to finished goods. The
process is continuous, operating 24 hours a day.
Normal spoilage occurs in Department A. Five percent of material is lost in the first
few seconds of processing. No spoilage occurs in Department B.
The following data are available for the month of October 2001:
Units in process, October 1
Stage of completion of beginning inventory
Units started or transferred in
Units transferred out
Units in process, October 31
Stage of completion of ending inventory
Units of Chemical Y added in Department B
Dept. A
8,000
3/4
50,000
46,500
?
1/3
Dept. B
10,000
3/10
?
?
?
1/5
44,500
Required:
a.
Prepare a schedule showing finished equivalents for Chemical X and for
conversion cost for Department A using the FIFO method.
b.
Determine for Department B the number of units of good product completed
during October and the number of units in process on October 31.
c.
Prepare a schedule for Department B showing finished equivalents for preceding
department cost, cost of Chemical Y, and conversion cost using the FIFO method.
742
Chapter 7
ANSWER:
a.
c.
Mat
46,500
9,000
(8,000)
47,500
b.
CC
46,500
3,000
(6,000 )
43,500
PD
44,500
12,000
(10,000 )
46,500
Mat
44,500
0
0
44,500
CC
44,500
2,400
(3,000 )
43,900
Since the material in the second department goes in at the 50 percent point and the ending
WIP inventory is only at the 20 percent point, units complete is the same as the
equivalents of material 44,500, given that units started plus units in beginning WIP are
equal to units complete plus ending WIP 10,000 + 46,500 44,500 = 12,000 units in
ending WIP.
MEDIUM