Chapter 4 –Process Costing
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Guided Example Click on links Exercise 4-6 Equivalent Units of Production—Weighted-Average Method Exercise 4-6 Exercise 4-7 Process Costing Journal Entries Exercise 4-7 Exercise 4-8 Equivalent Units; Cost per Equivalent Unit; Assigning Costs to Units—Weighted-Average Method Exercise 4-8 Exercise 4-9 Equivalent Units and Cost per Equivalent Unit— Weighted-Average Method Exercise 4-9 Chapter 4 – Process Costing
Transcript of Chapter 4 –Process Costing
Guided Example
Click on links
Exercise 4-6 Equivalent Units of Production—Weighted-Average Method
Exercise 4-6
Exercise 4-7 Process Costing Journal Entries Exercise 4-7
Exercise 4-8 Equivalent Units; Cost per Equivalent Unit; Assigning Costs to Units—Weighted-Average Method
Exercise 4-8
Exercise 4-9 Equivalent Units and Cost per Equivalent Unit—Weighted-Average Method
Exercise 4-9
Chapter 4 – Process Costing
Guided Example
Exercise 4-6
Guided Example
[LO2]
Duntroon Company uses the weighted-average method in its process costing system. It processes used tires for various manufacturers of basketball courts. Data relating to tons of tires processed during November are provided below:
Required:1. Compute the number of tons of tires completed and transferred out during November.2. Compute the equivalent units of production for materials and for labor and overhead for
November.
Percent CompletedTons Materials Labor and
Overhead
Work in process, November 1 18,000 80% 60%
Work in process, November 30 37,000 40% 50%
Started into production during November 225,000
Guided Example
Equivalent Units
Materials Labor & Overhead
Units transferred out 206,000 206,000Work in process, ending:37,000 units × 40% 14,80037,000 units × 50% 18,500 Equivalent units of production 220,800 224,500
Requirement 2: Compute the equivalent units of production for materials and for labor and overhead for November.
Requirement 1: Compute the number of tons of tires completed and transferred out during November.
TonsWork in process, November 1 18,000Started into production during the month 225,000Total tons in process 243,000Deduct work in process, November 30 37,000Completed and transferred out during the month 206,000
Guided Example
Exercise 4-7
Guided Example
[LO1]
London’s Lollies, LLC is located in the heart of London, England. The company makes molded lollipops that are sold in popular embossed tins. The company has two processing departments—Mixing and Setting. In the Mixing Department, the raw ingredients for the lollipops are mixed and then cooked in special vats. In the Setting Department, the melted candy and other ingredients from the Mixing Department are carefully poured into molds and sticks and decorative flourishes are applied by hand. After cooling, the lollipops are packed for sale. The company uses a process costing system. The T-accounts below show the flow of costs through the two departments in June:
Required:Prepare journal entries showing the flow of costs through the two processing departments during June.
Work in Process—Mixing
Balance 6/1 15,000Transferred out 245,000
Direct materials 65,000
Direct labor 90,000
Overhead 85,000
Work in Process—Setting
Balance 6/1 90,000Transferred out 440,000
Transferred in 245,000
Direct labor 47,000
Overhead 67,000
General JournalDebit Credit
Work in Process-Mixing Department 65,000Raw Materials
(To record issuing raw materials for use in production)65,000
Work in Process-Mixing Department 90,000
Work in Process-Setting Department 47,000
Wages Payable
(To record direct labor costs incurred)137,000
Work in Process-Mixing Department 85,000
Work in Process-Setting Department 67,000
Manufacturing Overhead
(To record applying manufacturing overhead)152,000
Work in Process-Setting Department 245,000
Work in Process-Mixing Department
(To record transfer of work in process from the Mixing Department to the Setting Department)
245,000
General JournalDebit Credit
Finished Goods 440,000Work in Process-Setting Department
(To record transfer of finished cans from the Setting Department to the Finished Goods warehouse)
440,000(e)
Guided Example
Exercise 4-8
Guided Example
[LO2], [LO3], [LO4]
Oscar Corporation uses the weighted-average method in its process costing system. It produces prefabricated tiles in a series of steps carried out in production departments. All of the material that is used in the first production department is added at the beginning of processing in that department. Data for March for the first production department follow:
Required:1. Calculate the first production department's equivalent units of production for materials and
conversion for March.2. Compute the first production department's cost per equivalent unit for materials and conversion
for March.3. Compute the first production department's cost of ending work in process inventory for materials,
conversion, and in total for March.4. Compute the first production department's cost of the units transferred to the next production
department for materials, conversion, and in total for March.
Percent CompleteUnits Materials Conversion
Work in process inventory, March 1 9,000 100% 50%Work in process inventory, March 31 15,000 100% 60%Materials cost in work in process inventory, March 1 $6,000 Conversion cost in work in process inventory, March 1 $10,900 Units started into production 195,000Units transferred to the next production department 189,000Materials cost added during March $45,000 Conversion cost added during March $395,000
Guided Example
Equivalent UnitsMaterials Conversion
Units transferred out 189,000 189,000
Work in process, ending:
15,000 units × 100% 15,000
15,000 units × 60% 9,000
Equivalent units of production 204,000 198,000
Requirement 1: Calculate the first production department's equivalent
units of production for materials and conversion for March.
Requirement 2: Compute the first production department's cost per
equivalent unit for materials and conversion for March
Materials ConversionCost of beginning work in process
inventory $6,000 $10,900
Cost added during the period 45,000 395,000
Total cost (a) $51,000 $405,900
Equivalent units of production (b) 204,000 198,000
Cost per equivalent unit (a) ÷ (b) $0.25 $2.05
Guided Example
Requirements 3 and 4: Compute the first production department's cost of ending work in process inventory for materials, conversion, and in
total for March, and compute the first production department's cost of the units transferred to the next production department for materials,
conversion, and in total for March.
Materials Conversion TotalEnding work in process inventory:Equivalent units of production 15,000 9,000Cost per equivalent unit $0.25 $2.05 Cost of ending work in process inventory $3,750 $18,450 $22,200
Units completed and transferred out:Units transferred to the next department 189,000 189,000Cost per equivalent unit $0.25 $2.05Cost of units transferred out $47,250 $387,450 $434,700
Guided Example
Exercise 4-9
Guided Example
[LO2], [LO3]
Willkens, Inc., uses the weighted-average method in its process costing system. It manufactures a product that passes through two departments. Data for a recent month for the first department follow:
The beginning work in process inventory was 90% complete with respect to materials and 50% complete with respect to labor and overhead. The ending work in process inventory was 80% complete with respect to materials and 20% complete with respect to labor and overhead.
Required:1. Compute the first department's equivalent units of production for materials, labor, and
overhead for the month.2. Determine the first department's cost per equivalent unit for materials, labor, and overhead
for the month.
Units Materials Labor Overhead
Work in process inventory, beginning 10,000 $9,500 $4,250 $7,790
Units started in process 65,000
Units transferred out 66,000
Work in process inventory, ending 9,000
Cost added during the month $52,720 $21,514 $32,212
Guided Example
Equivalent UnitsMaterials Labor
Units transferred out 66,000 66,000Work in process, ending:9,000 units × 80% 7,2009,000 units × 20% 1,800 Equivalent units of production 73,200 67,800
Requirement 1: Compute the first department's equivalent units of production for materials, labor, and overhead for the month.
Requirement 2: Determine the first department's cost per equivalent unit for materials, labor, and overhead for the month.
Materials LaborCost of beginning work in process inventory $9,500 $4,250
Cost added during the period 52,720 21,514 Total cost (a) $62,220 $25,764
Equivalent units of production (b) 73,200 67,800Cost per equivalent unit (a) ÷ (b) $0.85 $0.38
Overhead
$7,790 32,212
$40,002
67,800$0.59
Overhead66,000
1,800 67,800
