PROCESS COSTING

Problem 1: Landers Company has the following information available for May:

Beginning Work in Process Inventory

(25% complete as to conversion) 10,000 units
Started 120,000 units
Ending Work in Process Inventory
(30% complete as to conversion) 30,000 units

Beginning Work in Process Inventory Costs:

Material $ 2,100
Conversion 2,030

Current Period Costs:

Material $ 33,000
Conversion 109,695

All material is added at the start of production and all products completed are transferred out.

1. Refer to Landers Company. Prepare an equivalent units schedule using the (a) FIFO and (b)
weighted average method.

2. Refer to Landers Company. Prepare a schedule showing the computation for cost per equivalent
unit assuming the (a) FIFO and (b) weighted average method.

3. Refer to Landers Company. Prepare a schedule showing the assignment of costs assuming the (a)
FIFO and (b) weighted average method.

Problem 2: The Sweet Temptations Company has two processing departments, Cooking and Packaging.
Ingredients are placed into production at the beginning of the process in Cooking, where they are formed
into various shapes. When finished, they are transferred into Packaging, where the candy is placed into
heart and tuxedo boxes and covered with foil. All material added in Packaging is considered as one material
for convenience. Since the boxes contain a variety of candies, they are considered partially complete until
filled with the appropriate assortment. The following information relates to the two departments for
February 20X7:
Cooking Department:
Beginning WIP (30% complete as to conversion) 4,500 units
Units started this period 15,000 units
Ending WIP (60% complete as to conversion) 2,400 units
Packaging Department:
Beginning WIP (90% complete as to material, 80% complete as 1,000 units
to conversion)
Units started during period ?
Ending WIP (80% complete as to material and 80% complete as 500 units
to conversion)

a. Determine equivalent units of production for both departments using the weighted average method.
b. Determine equivalent units of production for both departments using the FIFO method.

Problem 3: The following costs were accumulated by Department 2 of Hughes Company during April:

Cost Transferred
from Dept. 1 Material Conversion Total
Costs
Beginning Inventory $ 17,050 $ 5,450 $ 22,500
Current Period Cost 184,000 $ 34,000 104,000 322,000
$ 201,050 $ 34,000 $ 109,450 $344,500
Production for April in Department 2 (in units):

WIP-April 1 2,000 60% complete

Complete period transferred 20,000
WIP-April 30 5,000 40% complete

Materials are not added in Department 2 until the very end of processing Department 2.
Required: Compute the cost of units completed and the value of ending WIP for:

a. Weighted average inventory assumption

b. FIFO inventory assumption

Problem 4: 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 August 20X6:

Dept. A Dept. B
Units in process, August 1 8,000 10,000
Stage of completion of beginning inventory 3/4 3/10
Units started or transferred in 50,000 ?
Units transferred out 46,500 ?
Units in process, August 31 ? ?
Stage of completion of ending inventory 1/3 1/5
Units of Chemical Y added in Department B 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 August and
the number of units in process on August 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.

Problem 5: Quigley Company manufactures a specialized product. 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 4,000
Received from Department 1 20,000
Completed and transferred to finished goods 16,000
Lost in processing (normal) 2,000
In process, September 30-2/3 complete for process cost 6,000

Cost Record:
Work in process inventory, September 1:
Preceding department cost $ 620
Processing cost 2,000 $2,620
Cost from preceding department in September 1,800
Material cost for September 4,800
Processing cost for September 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.

Problem 6: Copperfield Manufacturing 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 April 20x6.

Units in beginning inventory 4,200

Units transferred in from Assembly 42,000
Units spoiled 2,100
Good units transferred out 33,600

The costs per equivalent unit of production for each cost failure area as follows:

Cost of prior departments $5.00

Raw material 1.00
Conversion 3.00
Total cost per EUP $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 April 30. 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.

Problem 7: Ashcroft Industries manufactures wood furniture. 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 May 20X8

Beginning inventory (80% complete as to labor, 70% complete as to 1,000 units
overhead)
Transferred in during month 7,450 units
Ending inventory (40% complete as to labor, 20% complete as to overhead) 1,500 units
Normal spoilage (found during final quality inspection) 100 units
Abnormal spoilage-found at 30% completion of direct labor and 15% of 200 units
conversion; the sanding machine was misaligned and scarred the chairs

All other units were transferred to finished goods

Cost Data for May 20X8

Beginning work in process inventory:
Prior department costs $7,510
Varnish 950
Direct labor 2,194
Overhead 5,522 $ 16,176
Current period costs:
Prior department costs $68,540
Varnish 7,015
Direct labor 23,000
Overhead 56,782 155,337

Total costs to account for $171,513

Required: Determine the proper disposition of the May 20X8 costs for the Laminating Department using
the weighted average method.

Problem 8: Consider the following data for a cooking department for the month of January:

Physical
Units
Work in process, beginning inventory* 11,000
Started during current period 74,000
To account for 85,000
Good units completed and transferred out during current
period:
From beginning work in process 11,000
Started and completed 50,000
Good units completed 61,000
Spoiled units 8,000
Work in process, ending inventory~ 16,000
Accounted for 85,000

*Direct material, 100% complete; conversion costs, 25% complete

~Direct material, 100% complete; conversion costs, 75% complete
Inspection occurs when production is 100 percent completed. Normal spoilage is 11 percent of good units
completed and transferred out during the current period.

The following cost data are available:

Work in process, beginning inventory:
Direct material $220,000
Conversion costs 30,000 $ 250,000
Costs added during current period:
Direct material 1,480,000
Conversion costs 942,000
Costs to account for $2,672,000

Required: Prepare a detailed cost of production report. Use the FIFO method. Distinguish between normal
and abnormal spoilage.

Problem 9: Lumberton Industries has two departments. Department 1 uses FIFO costing and Department
2 uses weighted average.

Units are introduced into the process in Department 1 (this is the only material added in Department 1).
Spoilage occurs continuously through the department and normal spoilage should not exceed 10 percent of
the units started.

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 August 20X7:

Department 1 Production Data

Beginning inventory (65% complete) 1,000
Units started 25,000
Units completed 22,000
Units in ending inventory (40% complete) 2,800
 Department 1 Cost Data
Beginning inventory:
Material $ 1,550
Conversion 2,300 $ 3,850
Current period:
Material $38,080
Conversion 78,645 116,725
Total costs to account for $120,575

Department 2 Production Data

Beginning inventory (90% complete) 8,000
Units transferred in 22,000
Units completed 24,000
Units in ending inventory (20% complete) 4,500

Department 2 Cost Data

Beginning inventory:
Transferred in $40,800
Material 24,000
Conversion 4,320 $ 69,120*
Current period:
Transferred in $113,700
Material` 53,775
Conversion 11,079 178,554
Total costs to account for $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).

Problem 10: Orange Company manufactures a single product. All material is added at the beginning of the
process.

Costs Material Conversion Total

Beginning inventory $ 30,000 $ 3,600 $ 33,600
Current period 885,120 335,088 1,220,208
Total costs $915,120 $338,688 $1,253,808

UNITS
Beginning inventory (30% complete- 6,000 units
conversion)
Started 180,000 units
Completed 152,000 units
Ending inventory (70% complete-conversion) 20,000 units
Normal spoilage 4,800 units

Required: Find ending WIP inventory, abnormal loss, and COGM. Assume that, for conversion costs,
abnormal shrinkage is 60 percent.