Process Costing - Reviewer.docx

Prepared by: Brian Christian S. Villaluz, CPA ADVANCED FINANCIAL ACCOUNTING & REPORTING Process Costing Part I: Computation of Equivalent Units of Production (EUP) without spoilage Problem 1: Double Click Manufacturing Co. uses process costing in the manufacture of its sole product. The following production data are presented to you: Beginning inventory (40% converted) Started in process Ending inventory (60% converted)

10,000 units 75,000 units 20,000 units

All materials are added at the start of processing. 1. Using average costing, compute for the EUP for materials and conversion. 2. Using FIFO, compute for the EUP for materials and conversion. Problem 2: Double Click Manufacturing Co. uses process costing in the manufacture of its sole product. The following production data are presented to you: Beginning inventory (40% to complete) Started in process Ending inventory (60% to complete)

10,000 units 75,000 units 20,000 units

All materials are added at the end of processing. 1. Using average costing, compute for the EUP for materials and conversion. 2. Using FIFO, compute for the EUP for materials and conversion. Problem 3: Double Click Manufacturing Co. uses process costing in the manufacture of its sole product. The following production data are presented to you: Transferred out Started in process Ending inventory converted)

(7/8

120,000 units 150,000 units 45,000 units

Forty percent of materials is added when the processing is halfway completed; balance when 80% completed. Beginning inventory, if any, need 3/5 to be completed. 1. Using average costing, compute for the EUP for materials and conversion. 2. Using FIFO, compute for the EUP for materials and conversion. Problem 4: Double Click Manufacturing Co. uses process costing in the manufacture of its sole product. The following production data are presented to you: Beginning inventory (¾ to complete) Transferred out Units started

8,000 units 40,000 units 60,000 units

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Prepared by: Brian Christian S. Villaluz, CPA Ending inventory (6/7 completed) ??? 20% of materials is added when the units are 25% completed; remaining materials are added when the units are 90% converted. 1. Using average costing, compute for the EUP for materials and conversion. 2. Using FIFO, compute for the EUP for materials and conversion. Problem 5: Monique Textile Inc., produces sophisticated fabrics that are being supplied to 5-star hotels and to high-end condominiums that require components to be integrated in various points of the production. At the beginning of the month, 4,000 units were in process. These were 20% converted. For the current month, Monique started to produce 16,000 units. Only 12,000 of these were completed. The remainder was behind 25% from completion. Due to the complexity of this textile, materials are added at various points in the production. To sum up: Direct materials: 40% are put into production at the beginning 50% are placed when the fabrics are 55% completed 10% are placed when the fabrics are 99% done 1. Using average costing, compute for the EUP for materials and conversion. 2. Using FIFO, compute for the EUP for materials and conversion. Part II: Computation of Equivalent Units of Production (EUP) with spoilage Problem 6: Cherry Manufacturing Co. uses process costing in the manufacture of its sole product. The following production data are presented to you: Units started WIP, beg. (35% complete) Normal spoilage Abnormal spoilage WIP, end (30% incomplete)

100,000 units 20,000 units 3,500 units 5,000 units 14,500 units

All materials are added at the start of the process. Cherry inspects goods at 75% completion as to conversion. 1. Using average costing, compute for the EUP for materials and conversion. 2. Using FIFO, compute for the EUP for materials and conversion. Problem 7: The following information is available for BGC Company for the current period: Beginning WIP complete) Started in process Ending WIP complete) Normal spoilage Abnormal spoilage

(75%

14,500 units

(60%

75,000 units 16,000 units 5,000 units 2,500 units

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Prepared by: Brian Christian S. Villaluz, CPA

All materials are added at the start of production. 1. Using average costing, compute for the EUP for materials and conversion. 2. Using FIFO, compute for the EUP for materials and conversion. Part III: Cost of production report (with spoilage) Problem 8: Cherry Manufacturing Co. uses process costing in the manufacture of its sole product. The following information is available for the current year: Units started WIP, beg. (35% complete) Normal spoilage Abnormal spoilage WIP, end (30% incomplete)

100,000 units 20,000 units 3,500 units 5,000 units 14,500 units

Cost of beginning WIP Material Conversion

P90,000 210,000

Current cost Material Conversion

690,000 471,150

All materials are added at the start of the process. Cherry inspects goods at 75% completion as to conversion. Using 1. 2. 3. 4. 5.

FIFO… Compute Compute Compute Compute Compute

for for for for for

the the the the the

EUP for materials and conversion. cost per EUP for materials and conversion. cost assigned to units completed. cost assigned to the ending inventory. cost of abnormal lost units.

Using average costing… 6. Compute for the EUP for materials and conversion. 7. Compute for the cost per EUP for materials and conversion. 8. Compute for the cost assigned to units completed. 9. Compute for the cost assigned to the ending inventory. 10.Compute for the cost of abnormal lost units. Problem 9: Cherry Manufacturing Co. uses process costing in the manufacture of its sole product. The following information is available for the current year: Units started WIP, beg. (35% complete) Normal spoilage Abnormal spoilage WIP, end (20% incomplete) Cost

of

100,000 units 20,000 units 3,500 units 5,000 units 14,500 units

beginning

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Prepared by: Brian Christian S. Villaluz, CPA WIP Material Conversion

P90,000 210,000

Current cost Material Conversion

690,000 471,150

All materials are added at the start of the process. Cherry inspects goods at 75% completion as to conversion. Using 1. 2. 3. 4.

FIFO… Compute Compute Compute Compute

Using 5. 6. 7. 8.

average costing… Compute for the EUP for materials and conversion. Compute for the cost per EUP for materials and conversion. Compute for the cost assigned to units completed. Compute for the cost assigned to the ending inventory.

for for for for

the the the the

EUP for materials and conversion. cost per EUP for materials and conversion. cost assigned to units completed. cost assigned to the ending inventory.

Problem 10: Cherry Manufacturing Co. uses process costing in the manufacture of its sole product. The following information is available for the current year: Units started WIP, beg. (80% complete) Normal spoilage Abnormal spoilage WIP, end (20% incomplete) Cost of beginning WIP Material

100,000 units 20,000 units 3,500 units 5,000 units 14,500 units P90,00 0 210,00 0

Conversion Current cost Material

690,00 0 471,15 0

Conversion

All materials are added at the start of the process. Cherry inspects goods at 75% completion as to conversion. Using 1. 2. 3. 4.

FIFO… Compute Compute Compute Compute

for for for for

the the the the

EUP for materials and conversion. cost per EUP for materials and conversion. cost assigned to units completed. cost assigned to the ending inventory.

Using average costing…

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Prepared by: Brian Christian S. Villaluz, CPA 5. 6. 7. 8.

Compute Compute Compute Compute

for for for for

the the the the

EUP for materials and conversion. cost per EUP for materials and conversion. cost assigned to units completed. cost assigned to the ending inventory.

Part IV: Comprehensive problem (without spoilage) A company employs FIFO process costing system concerning its only product which undergoes production in assembly department and finishing department. The following data for the year ended December 31, 2016 are provided: ASSEMBLY DEPARTMENT January 1, 2016

December 31, 2016 Units started during 2016

Units: 100,000 units – 40% complete as to conversion

150,000 units – 80% complete as to conversion 400,000 units

Cost: Direct materials – P3,000,000 Direct labor – P5,000,000 Factory overhead – P2,000,000 ??? Direct materials – P12,000,000 Direct labor – P15,000,000 Factory overhead – P13,000,000

FINISHING DEPARTMENT January 1, 2016

December 31, 2016 Units started during 2016

Units: 50,000 units – 70% incomplete as to conversion

30,000 units – 10% incomplete as to conversion ???

Cost: Transferred In – P10,000,000 Direct materials – P6,000,000 Direct labor – P1,000,000 Factory overhead – P3,000,000 ??? Transferred In – ??? Direct materials – P30,000,000 Direct labor – P40,000,000 Factory overhead – P10,000,000

Additional information: (a) It is the company’s policy to add conversion cost evenly throughout the period in the two departments. (b) It is the company’s policy to add all direct materials in the assembly department at the start of the process while all direct materials in the finishing department are added at the end of the process. (c) There is no spoilage in both departments. In the 1. 2. 3.

assembly department… What is the EUP for materials and conversion? How much is the cost per EUP for materials and conversion? What is the cost of goods manufactured or cost assigned to units completed for the year ended December 31, 2016? 4. What is the cost assigned to December 31, 2016 work-in-process inventory?

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Prepared by: Brian Christian S. Villaluz, CPA

In the 5. 6. 7.

finishing department… What is the EUP for transferred in, materials, and conversion? How much is the cost per EUP for transferred in, materials, and conversion? What is the cost of goods manufactured or cost assigned to units completed for the year ended December 31, 2016? 8. What is the cost assigned to December 31, 2016 work-in-process inventory?

Part V: Comprehensive problem (with spoilage) Exciting Company applies process costing in the manufacture of its sole product. Manufacturing starts in Department 1 where materials are all added at the start of processing. The good units are then transferred to Department 2 where all the incremental materials needed for its completion are added after final inspection. In both departments, units are inspected at the end of processing. Department 1 uses FIFO while Department 2 uses average costing. The following production data for August show:

QUANTITY SCHEDULE Beg. WIP Stage of completion Ending WIP Stage of completion Put into process Normal loss Abnormal loss COST DATA Beg. WIP Transferred in Materials Conversion costs Current period costs Materials Conversion costs Transferred in

Department 1

Department 2

6,000 1/3 9,000 2/3 44,000 1,200 800

4,000 4/5 7,000 5/7 1,000 500

P9,000 6,500

P3,710 4,000

88,000 67,500 -

62,100 49,300 ???

DEPARTMENT 1 1. What is the EUP for materials and conversion? 2. How much is the cost per EUP for materials and conversion? 3. What is the cost of goods manufactured or cost assigned to units completed for the year ended December 31, 2016? 4. What is the cost assigned to December 31, 2016 work-in-process inventory? DEPARTMENT 2 5. What is the EUP for transferred in, materials, and conversion? 6. How much is the cost per EUP for materials and conversion? 7. What is the cost of goods manufactured or cost assigned to units completed for the year ended December 31, 2016? 8. What is the cost assigned to December 31, 2016 work-in-process inventory? END  -BCSV-

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Prepared by: Brian Christian S. Villaluz, CPA

ANSWERS: PROBLEM 1: 1. DM – 85,000; CC – 77,000 2. DM – 75,000; CC – 73,000

PROBLEM 7: 1. DM – 84,500; CC – 78,100 2. DM – 70,000; CC – 67,225

PROBLEM 2: 1. DM – 65,000; CC – 73,000 2. DM – 65,000; CC – 67,000

PROBLEM 8: 1. DM – 100,000; CC – 106,525 2. 6.90; 4.42 3. 1,264,853 4. 144,913 5. 51,075 6. DM – 120,000; CC – 113,525 7. 6.50; 6.00 8. 1,251,000 9. 155,150 10. 55,000

PROBLEM 3: 1. DM – 165,000; CC – 159,375 2. DM – 165,000; CC – 153,375

PROBLEM 9: 1. DM – 100,000; CC – 107,975 2. 6.90; 4.36 3. 1,254,161 4. 155,760 5. DM – 120,000; CC – 114,975 6. 6.50; 5.92 7. 1,238,412 8. 167,540

PROBLEM 4: 1. DM – 45,600; CC – 64,000 2. DM – 44,000; CC – 62,000

PROBLEM 10: 1. DM – 100,000; CC – 98,975 2. 6.90; 4.76 3. 1,248,042 4. 160,729 5. DM – 120,000; CC – 114,975 6. 6.50; 5.92 7. 1,238,412 8. 167,540

PROBLEM 5: 1. DM – 19,600; CC – 19,000 2. DM – 18,000; CC – 18,200

Part IV 1. 2. 3. 4. 5. 6. 7. 8.

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DM - 400,000; CC - 430,000 30; 65.12 37,687,200 12,314,400 TI – 350,000; DM – 370,000; CC – 382,000 107.68; 81.08; 130.89 130,923,150 6,764,430

Prepared by: Brian Christian S. Villaluz, CPA

PROBLEM 6: 1. DM – 120,000; CC – 113,525 2. DM – 100,000; CC – 106,525

Part V 1. 2. 3. 4. 5. 6. 7. 8.

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DM – 44,000; CC – 45,000 2.00; 1.50 141,200 27,000 43,000; 34,500; 41,000 3.37; 1.80; 1.30 227,885 30,090