CHAPTER 3

PROCESS COSTING

CHAPTER LEARNING OBJECTIVES

1. Discuss the uses of a process cost system and how it compares to a job order cost system. Companies that mass-produce similar products in a continuous fashion use process cost systems. Once production begins, it continues until the finished product emerges. Each unit of finished product is indistinguishable from every other unit.

Job order cost systems are similar to process cost systems in three ways: (1) Both systems track the same cost components—direct materials, direct labor, and manufacturing overhead; (2) Both accumulate cost in the same accounts—Raw Materials Inventory, Factory Labor, and Manufacturing Overhead; and, (3) Both assign accumulated costs to the same accounts—Work in Process Inventory, Finished Goods Inventory, and Cost of Goods Sold. However, the methods used to assign costs differ significantly.

There are four main differences between the two cost systems: (1) A process cost system uses separate work in process inventory accounts for each department or manufacturing process, rather than only one work in process inventory account used in a job order cost system; (2) A process cost system summarizes costs in a production cost report for each department. A job order cost system charges costs to individual jobs and summarizes them in a job cost sheet; (3) Costs are totaled at the end of a time period in a process cost system, but at the completion of a job in a job order cost system; and, (4) A process cost system calculates unit cost as Total manufacturing costs for the period ÷ Equivalent units of production for the period. A job order cost system calculates unit cost as Total cost per job ÷ Units produced.

2. Explain the flow of costs in a process cost system and the journal entries to assign manufacturing costs. A process cost system assigns manufacturing costs for raw materials, labor, and overhead to work in process inventory accounts for various departments or manufacturing processes. It transfers the costs of partially completed units from one department to another as those units move through the manufacturing process. The system transfers the costs of completed work to Finished Goods Inventory. Finally, when inventory is sold, the system transfers the costs to Cost of Goods Sold.

Entries to assign the costs of direct materials, direct labor, and manufacturing overhead consist of credits to Raw Materials Inventory, Factory Labor, and Manufacturing Overhead, and debits to Work in Process Inventory for each department. Entries to record the cost of good transferred to another department are a credit to Work in Process Inventory for the department whose work is finished and a debit to the Work in Process Inventory for the department to which the goods are transferred. The entry to record units completed and transferred to the warehouse is a credit to Work in Process Inventory for the department whose work is finished and a debit to Finished Goods Inventory. The entry to record the sale of goods is a credit to Finished Goods Inventory and a debit to Cost of Goods Sold.

3. Compute equivalent units of production. Equivalent units of production measure work done during a period, expressed in fully completed units. Companies use this measure to determine the cost per unit of completed product. Equivalent units are the sum of units completed and transferred out plus equivalent units of ending work in process inventory.

4. Complete the four steps to prepare a production cost report. The four steps to complete a production cost report are as follows. (1) Compute the physical unit flow—that is, the total units to be accounted for; (2) Compute the equivalent units of production; (3) Compute the unit production costs per equivalent units of production; and, (4) Prepare a cost reconciliation schedule, which shows that the total costs accounted for equal the total costs to be accounted for.

The production cost report contains both quantity and cost data for a production department. There are four sections in the report: (1) number of physical units, (2) equivalent units determination, (3) unit costs, and (4) cost reconciliation schedule.

^a5. Compute equivalent units using the FIFO method. Equivalent units under the FIFO method are the sum of the work performed to (1) finish the units of beginning work in process inventory, if any; (2) complete the units started into production during the period; and, (3) start, but only partially complete, the units in ending work in process inventory.

TRUE-FALSE STATEMENTS

1. Process cost accounting focuses on the process involved in mass-producing products that are very similar in nature.

2. Process cost systems are used to apply costs to a specific job, such as the manufacturing of a specialized machine.

3. A company that produces motion pictures would likely use a process cost system.

4. In a process cost system, costs are tracked through a series of connected manufacturing processes or departments, rather than by individual jobs.

5. In a process cost system, total costs are determined at the end of a month or year.

6. Separate work in process inventory accounts are maintained for each production department or manufacturing process in a process cost system.

7. In a process cost system, direct materials, direct labor and manufacturing overhead are only added in the first production department.

8. The assignment of the three manufacturing cost components to Work in Process Inventory in a process cost system is the same as in a job order cost system.

9. Fewer materials requisitions are generally required in a process cost system than in a job order cost system.

10. In a process cost system, labor costs incurred may be captured on time tickets.

11. A primary driver of overhead costs in continuous manufacturing operations is machine time used.

12. Equivalent units of production are used to determine the cost per unit of completed products.

13. Equivalent units of production measure the work done during a period, expressed in fully completed units.

14. Equivalent units of production is the sum of units completed and transferred out plus equivalent units of beginning work in process inventory.

15. The weighted-average method of computing equivalent units is a widely used method in practice.

16. There are no units in process at the beginning of the period, 1,500 units in process at the end of the period that are 40% complete, and 15,000 units completed and transferred out during the period. Based on this information, there were 14,400 equivalent units of production during the period.

17. The first step performed in preparing a production cost report is computing the equivalent units of production.

18. Equivalent units of production must be calculated before the unit production costs can be computed.

19. The physical units in a department are another name for the equivalent units of production.

20. Unit material cost is computed by taking total material costs charged added to production for the period and dividing by the physical units in the process during the period.

21. When equivalent units of production are different for materials and conversion costs, unit costs are computed for materials, conversion, and total manufacturing.

22. The total manufacturing cost per unit is used in costing the units completed and transferred during the period.

23. A production cost report is an internal document for management that shows production quantity and cost data for a particular job.

24. Production cost reports provide a basis for evaluating the productivity of a department.

25. Companies often use a combination of a process cost and a job order cost system, called operations costing.

^a26. The FIFO method of computing equivalent units is easier to understand and use than the weighted-average method.

^a27. The FIFO method of computing equivalent units is conceptually superior to the weighted-average method.

^a28. When comparing the FIFO with the weighted-average method of computing equivalent units, the FIFO method provides more current cost information.

^a29. There are no units in ending work in process inventory at the end of the period under the FIFO method of computing equivalent units.

^a30. Companies using the weighted-average method of computing equivalent units do not complete units left over from the previous accounting periods, they start new units.

31. In continuous process manufacturing, generally once the production begins, it continues until the finished product emerges.

32. One similarity of process cost accounting with job order cost accounting is that both determine total manufacturing costs after each job.

33. The flow of costs in a process costing system requires that materials be added in one department, labor added in another department and manufacturing overhead in a third department.

34. When finished goods are sold, the entry to record the cost of goods sold is a debit to Finished Goods Inventory and a credit to Cost of Goods Sold.

35. When there is no beginning work in process inventory and materials are entered at the beginning of the process, equivalent units of materials are the same as the units started into production.

36. In order to compute the physical unit flow, a company must first compute unit production costs.

^a37. Under the FIFO method, it is assumed that the beginning work in process is completed before new work is started.

MULTIPLE CHOICE QUESTIONS

38. A process cost accounting system is most appropriate when

a. a variety of different products are produced, each one requiring different types of materials, labor, and overhead.

b. the focus of attention is on a particular job or order.

c. similar products are mass-produced.

d. individual products are custom made to the specification of customers.

39. A characteristic of products that are mass-produced in a continuous fashion is that

a. the products are identical or very similar in nature.

b. they are grouped in batches.

c. they are produced at the time an order is received.

d. their costs are accumulated on job cost sheets.

40. A process cost system would be used for all of the following products except

a. ramen noodles.

b. computer chips.

c. music videos.

d. energy drinks.

41. In a process cost system,

a. a Work in Process Inventory account is maintained for each product.

b. a materials requisition must identify the job on which the materials will be used.

c. a Work in Process Inventory account is maintained for each process.

d. one Work in Process Inventory account is maintained for all the processes, similar to a job order cost system.

42. Differences between a job order cost system and a process cost system include all of the following except the

a. documents used to track costs.

b. point at which costs are totaled.

c. unit cost computations.

d. flow of costs.

43. Which of these best reflects a distinguishing factor between a job order cost system and a process cost system?

a. The detail at which costs are calculated

b. The time period each covers

c. The number of work in process inventory accounts

d. The manufacturing cost components included

44. Which of the following is a true statement about process cost systems?

a. In process cost systems, costs are accumulated but not assigned.

b. A process cost system has one work in process inventory account for each process.

c. In process cost systems, costs are summarized on job cost sheets.

d. Unit costs are not computed in process cost systems.

45. Which of the following is correct regarding the number of Work in Process Inventory accounts in job order and process cost systems?

Job Order Process

a. Work in process inventory several one for each process

b. Work in process inventory one one

c. Work in process inventory one one for each process

d. Work in process inventory several one

46. In a process cost system, unit costs are determined using a

a. numerator of costs of each job.

b. denominator of equivalent units of production for the period.

c. denominator of units produced for the job.

d. denominator of units produced for the day.

47. In process cost accounting, manufacturing costs are summarized on a

a. job order cost sheet.

b. process order cost sheet.

c. production cost report.

d. manufacturing cost sheet.

48. Which of the following manufacturing cost components are incurred in a process cost system?

a. Direct materials

b. Direct labor

c. Manufacturing overhead

d. All of these

49. In a process cost system, product costs are summarized

a. on job cost sheets.

b. on production cost reports.

c. after each unit is produced.

d. when the products are sold.

50. When manufacturing overhead costs are assigned to production in a process cost system, they are debited to

a. the Finished Goods Inventory account.

b. Cost of Goods Sold.

c. a Manufacturing Overhead account.

d. a Work in Process Inventory account.

51. A product requires processing in two departments, the Baking Department and then, the Packaging Department, before it is completed. Costs completed and transferred out of the Baking Department will be transferred to

a. Finished Goods Inventory.

b. Cost of Goods Sold.

c. Work in Process Inventory—Packaging Department.

d. Manufacturing Overhead.

52. Which of the following would not appear as a debit in the Work in Process Inventory account of a second department in a two-stage production process?

a. Materials used

b. Overhead applied

c. Labor assigned

d. Cost of products transferred out

53. Materials requisitions are:

a. not used in process costing.

b. generally used more frequently in process costing than job order costing.

c. generally used less frequently in process costing than job order costing.

d. used more frequently by latter stage production departments.

54. A primary driver of overhead costs in continuous manufacturing operations is

a. direct labor dollars.

b. direct labor hours.

c. machine hours.

d. machine maintenance dollars.

55. Price Company assigns overhead based on machine hours. The Milling Department logs 2,400 machine hours and Cutting Department shows 4,000 machine hours for the period. If the overhead rate is $5 per machine hour, the entry to assign overhead will show a

a. debit to Manufacturing Overhead for $32,000.

b. credit to Work in Process Inventory—Cutting Department for $20,000.

c. debit to Work in Process Inventory – Milling Department for $20,000.

d. credit to Manufacturing Overhead for $32,000.

Ex. 159

Lutz Company produces a product in two departments: (1) Mixing and (2) Finishing. The company uses a process cost accounting system. Lutz had the following transactions during the current month:

(a) Purchased materials for $50,000 on account.

(b) Direct materials requisitioned for production were:

Direct materials

Mixing department $20,000

Finishing department 14,000

(c) Incurred labor costs of $74,000.

(d) Factory labor used:

Mixing department $44,000

Finishing department 30,000

(e) Manufacturing overhead is applied to the product based on machine hours used in each department:

Mixing department—400 machine hours at $30 per machine hour.

Finishing department—500 machine hours at $20 per machine hour.

(f) Units costing $56,000 were completed in the Mixing Department and were transferred to the Finishing Department.

(g) Units costing $70,000 were completed in the Finishing Department and were transferred to finished goods.

(h) Finished goods costing $40,000 were sold on account for $55,000.

Instructions

Prepare the journal entries to record the preceding transactions for Lutz Company.

Ex. 160

Sanders Company has two production departments: Fabricating and Finishing. Beginning inventories are: Work in Process Inventory—Fabricating, $6,030; Work in Process Inventory—Finishing, $4,100; and Finished Goods Inventory, $5,600. During the month the following transactions occurred:

1. Purchased $40,000 of raw materials on account.

2. Incurred $75,000 of factory labor. Wages are unpaid.

3. Incurred $50,000 of manufacturing overhead; $40,000 was paid and the remainder is unpaid.

4. Requisitioned direct materials for Fabricating, $10,000 and Finishing, $8,000.

5. Used factory labor for Finishing, $60,000 and Fabricating, $15,000.

6. Assigned $45,000 of overhead based on machine hours used in each department. The Finishing Department used twice as many machine hours as did Fabricating.

Instructions

Journalize the transactions for the month. Omit explanations.

Ex. 161

The Pasta Factory manufactures spaghetti sauce through two production departments: Cooking and Packaging. For the month of February, the work in process inventory accounts show the following beginning balances and inputs:

Cooking Packaging

Beginning Work in Process Inventory $ -0- $ 6,000

Direct Materials 40,000 26,000

Direct Labor 20,000 9,000

Manufacturing Overhead 30,000 15,000

Costs transferred from Cooking to Packaging 65,000

Instructions

Journalize the February transactions that involved the work in process inventory accounts. Omit explanations

Ex. 162

Benson Industries uses a process cost system. Products are processed first by Department A and then by Department B before being transferred to the finished goods warehouse. Shown below is the cost information for Department B during the month of October:

Costs of units transferred in $120,000

Manufacturing costs added in Department B:

Direct materials $50,000

Direct labor 12,000

Manufacturing overhead 19,000 81,000

Total costs charged to Department B in October $201,000

The balance in work in process inventory in Department B at October 1 is $25,000 and it is $30,000 at October 31.

Ex. 162 (Cont.)

Instructions

Prepare journal entries to record the following transactions for the month of October (omit explanations):

(a) The transfer of production from Department A to B.

(b) The manufacturing costs incurred by Department B.

(c) The transfer of completed units from Department B to the finished goods warehouse.

Ex. 163

Hardy Company manufactures a single product by a continuous process involving two production departments. The records indicate that $140,000 of direct materials were issued to and $200,000 of direct labor was incurred by Department 1 in the manufacture of the product. The factory overhead rate is $25 per machine hour; machine hours were 5,000 in Department 1. Work in process inventory in the department at the beginning of the period totaled $35,000; and work in process inventory at the end of the period was $25,000.

Instructions

Prepare entries to record the following transactions (omit explanations):

(a) The flow of costs into Department 1 for

(1) direct materials

(2) direct labor

(3) manufacturing overhead

(b) The transfer of production costs to Department 2.

Ex. 164

Muffy Painting Company has the following production data for March.

End. Work in Process Inv.

Beg. Work Units Completed % Complete as to

Month in Process Inv. and Transferred Out Units Conversion Cost

March 3,000 42,000 12,000 75%

Instructions

Compute equivalent units of production for March for both materials and conversion costs. Materials are entered at the beginning of the process. Conversion costs are incurred uniformly throughout the process.

Ex. 165

The Nitrogen Fixation Department of Tomco Company began the month of December with work in process inventory of 4,000 units that are 100% complete as to materials and 30% complete as to conversion costs. Units completed and transferred out are 12,000 units. Ending work in process inventory contains 10,000 units that are 100% complete as to materials and 40% complete as to conversion costs. All materials are assigned at the beginning of the process. Conversion costs are incurred uniformly throughout the process.

Instructions

Compute the equivalent units of production for materials and conversion costs for the month of December.

Ex. 166

At Crenshaw Company, materials are entered at the beginning of the production process and conversion costs are assigned uniformly throughout the process. Work in process inventories, with the percentage of work done on conversion, and production data for its Painting Department in selected months are as follows:

Beg. Work in Process Inv. End. Work in Process Inv.

Percentage Units Completed Percentage

Month Units Completed and Transferred Out Units Completed

July -0- — 11,000 1,500 90%

Sept. 2,500 20% 9,000 5,000 70%

Instructions

(a) Compute the total units to be accounted for in July.

(b) Compute the equivalent units of production for materials and conversion costs for September.

Ex. 167

Watts Company adds materials at the beginning of the process and conversion costs are incurred uniformly throughout the process.

Instructions

Complete the following calculation of equivalent units of production for materials and conversion costs. Equivalent Units of Production

Physical Units Materials Conversion Costs

Completed and transferred out 40,000

Ending work in process inventory

Materials

Conversion costs, 75% complete 12,000

Total units

Ex. 168

The general ledger of Oates Company has the following work in process inventory account.

WORK IN PROCESS INVENTORY—FINISHING

6/1 Balance 8,000 6/30 Transferred out ?

6/1 Materials 1,800

6/30 Labor 3,800

6/30 Overhead 2,800

6/30 Balance ?

Production records show that there were 2,000 units in beginning work in process inventory that were 50% complete; 8,000 units started into production, and 4,500 units completed and transferred out. The beginning work in process inventory had conversion costs of $3,150. The units in ending work in process inventory were 60% complete as to conversion costs. Materials are added at the beginning of the process.

Instructions

(a) How many units are in process at June 30?

(b) What is the unit conversion cost for June?

(c) What is the conversion cost in the June 30 inventory?

Ex. 169

The Assembly Department uses a process cost accounting system and the weighted-average cost flow assumption. The department adds materials at the beginning of the process and incurs conversion costs uniformly throughout the process. During July, $190,000 of materials costs and $137,100 in conversion costs were charged to the department. The beginning work in process inventory was $93,000 on July 1, comprised of $80,000 of materials costs and $13,000 of conversion costs.

Other data for the month of July are as follows:

Beginning work in process inventory, 7/1 25,000 units (40% complete as to conversion costs)

Units completed and transferred out 70,000 units

Ending work in process inventory, 7/31 30,000 units (30% complete as to conversion costs)

Instructions

1. How many physical units have to be accounted for in July?

2. What are the equivalent units of production for materials and for conversion costs for the month of July?

3. What is the total cost assigned to the 70,000 units that were completed and transferred out of work in process inventory in July?

4. What is the total cost of the July 31 work in process inventory?

Ex. 170

The Finishing Department of Edwards Company has the following production and cost data for July:

1. Completed and transferred out, 8,000 units

2. Ending work in process inventory, 2,000 units that are 40% complete as to conversion costs

3. Materials added, $30,000; conversion costs incurred, $17,600

Materials are entered at the beginning of the process. Conversion costs are incurred uniformly during the process.

Instructions

(a) Compute the equivalent units of production for materials and conversion costs for the month of July.

(b) Compute unit costs and prepare a cost reconciliation schedule.

Ex. 171

Massey Corporation uses a process cost system and the weighted-average cost flow assumption. Production begins in the Fabricating Department where materials are added at the beginning of the process and conversion costs are incurred uniformly throughout the process. On March 1, the beginning work in process inventory consisted of 20,000 units which were 60% complete as to conversion costs and had a cost of $175,000, $145,000 of which were materials costs. During March, the following occurred:

Materials added $305,000

Conversion costs incurred $120,000

Units completed and transferred out in March 50,000

Units in ending work in process inventory, 3/31

(40% complete as to conversion costs) 25,000

Instructions

1. What are the equivalent units of production for materials and conversion costs in the Fabricating Department for the month of March?

2. What are the costs assigned to the units in ending work in process inventory?

3. What are the costs assigned to the units completed and transferred out during March?

Ex. 172

Given below are the production data for Department No. 1 for the first month of operation:

Costs charged to Department 1:

Direct Materials $12,000

Labor 2,600

Overhead 15,900

During this first month of operations, 4,000 units were started into production; 3,500 units were completed and transferred out; and the remaining 500 units are 100% completed with respect to materials and 40% complete with respect to conversion costs.

Instructions

Compute the following:

(a) Unit materials cost

(b) Equivalent units of production for conversion costs

(c) Unit conversion cost

(d) Total cost of 500 units in process at end of month

(e) Total cost of 3,500 units completed and transferred out

Ex. 173

The ledger of Kinsler Company has the following work in process inventory account.

Production records show that there were 700 units in the beginning work in process inventory that are 30% complete, 3,800 units started, and 4,000 units completed and transferred out. The beginning work in process inventory had materials cost of $3,060 and conversion costs of $2,240. The units in ending work in process inventory were 40% complete as to conversion costs. Materials are entered at the beginning of the painting process.

Ex. 173 (Cont.)

Instructions

(a) How many units are in process at May 31?

(b) What is the unit materials cost for May?

(c) What is the unit conversion cost for May?

(d) What is the total cost of units completed and transferred out in May?

(e) What is the cost of the May 31 inventory?

Ex. 174

The Cutting Department of Sanderson Company has the following production and cost data for July.

Materials are entered at the beginning of the process. Conversion costs are incurred uniformly during the process.

Instructions

(a) Determine the equivalent units of production for (1) materials and (2) conversion costs.

(b) Compute unit costs and prepare a cost reconciliation schedule.

Ex. 175

Wilkinson Company has gathered the following information.

Units in beginning work in process inventory -0-

Units started into production 54,000

Units in ending work in process inventory 10,000

Percent complete for conversion costs in

ending work in process inventory 60%

Costs incurred:

Direct materials $ 81,000

Direct labor $ 99,000

Overhead $131,000

Instructions

(a) Compute equivalent units of production for materials and for conversion costs.

(b) Determine the unit costs of production.

(c) Show the assignment of costs to units completed and transferred out and in process.

Ex. 176

Carlton Company has gathered the following information

Units in beginning work in process inventory 25,000

Units started into production 115,000

Units in ending work in process inventory 30,000

Percent complete for conversion costs in

ending work in process inventory 40%

Costs (For units in Beg. Work in Process and Started into Production):

Direct materials $175,000

Direct labor $235,400

Overhead $191,600

Materials are added at the beginning of the process.

Instructions

(a) Compute equivalent units of production for materials and for conversion costs.

(b) Determine the unit costs of production.

(c) Show the assignment of costs to units completed and transferred out and to those still in process.

Ex. 177

The Polishing Department of Estaban Company has the following production and manufacturing cost data for September. Materials are entered at the beginning of the process.

Production: Beginning work in process inventory 2,000 units that are 100% complete as to materials and 40% complete as to conversion costs; units started during the period are 48,000, ending work in process inventory of 6,000 units 30% complete as to conversion costs.

Manufacturing costs: Beginning work in process inventory costs, comprised of $18,000 of materials and $13,000 of conversion costs; materials costs added in Polishing during the month, $202,000 labor and overhead applied in Polishing during the month $178,300 and $312,500 respectively.

Instructions

(a) Compute the equivalent units of productions for materials and conversion costs for the month of September.

(b) Compute the unit costs for materials and conversion costs for the month.

(c) Determine the costs to be assigned to the units completed and transferred out and in process.

Ex. 178

Grey Building Supplies' total materials costs are $30,000 and total conversion costs are $33,000. Equivalent units of production for materials are 10,000, and 5,000 for conversion costs.

Instructions

Compute the unit costs for materials, conversion costs, and total manufacturing costs for the month.

Ex. 179

Glazer, Inc. has the following production data for June:

Completed and transferred out 50,000 units

Ending work in process inventory 5,000 units

The units in work in process inventory are 100% complete for materials and 60% complete for conversion costs. Materials costs are $3 per unit and conversion costs are $6 per unit.

Instructions

Determine the costs to be assigned to the units completed and transferred out and the units in ending work in process.

Ex. 180

Production costs chargeable to the Sanding Department in July in Magnum Company are $30,000 for materials, $17,000 for labor, and $13,000 for manufacturing overhead. Equivalent units of production are 30,000 for materials and 20,000 for conversion costs.

Instructions

Compute the unit costs for materials and conversion costs.

Ex. 181

Mayer Company uses a process cost system. The Molding Department adds materials at the beginning of the process and conversion costs are incurred uniformly throughout the process. Work in process inventory on May 1 was 75% complete and work in process inventory on May 31 was 60% complete as to conversion costs.

Instructions

Complete the Production Cost Report for the Molding Department for the month of May using the above information and the information below.

MAYER COMPANY

Molding Department

Production Cost Report

For the Month Ended May 31, 2022

Equivalent Units of Production

QUANTITIES Physical Units Materials Conversion Costs

Units to be accounted for

Work in process, May 1 8,000

Started into production 32,000

Total units to be accounted for 40,000

Units accounted for

Completed and transferred out 35,000

Work in process, May 31 5,000

Total units accounted for 40,000

COSTS

Unit costs Materials Conversion Costs Total

Costs in May $140,000 $161,500 $301,500

Equivalent units of production

Unit costs $ $ $

Costs to be accounted for

Work in process, May 1 $ 60,000

Started into production 241,500

Total costs to be accounted for $301,500

Cost Reconciliation Schedule

Costs accounted for

Completed and transferred out $

Work in process, May 31

Materials $

Conversion costs

Total costs accounted for $301,500

Ex. 182

Baker Winery manufactures a fine wine in two departments, Fermenting and Bottling. In the Fermenting Department, grapes are aged in casks for a period of 30 days. In the Bottling Department, the wine is bottled and then sent to the finished goods warehouse. Labor and overhead are incurred uniformly through both processes. Materials are entered at the beginning of both processes. Cost and production data for the Fermenting Department for December 2022 are presented below:

Cost data:

Beginning work in process inventory $ 37,000 ($30,000 of materials cost)

Materials 390,000

Conversion costs 116,000

Total costs $543,000

Ex. 182 (cont.)

Production data

Beginning work in process inventory (gallons) 5,000 (40% as to conversion costs)

Gallons started into production 79,000

Ending work in process inventory (gallons) 8,000 (75% as to conversion costs)

Instructions

(a) Compute the equivalent units of production.

(b) Determine the unit production costs.

(c) Determine the costs to be assigned to units completed and transferred out and ending work in process inventory.

Ex. 183

The Assembly Department of Nitz Company has the following production and cost data at the end of May, 2022, its first period of operations.

Production: 30,000 units started into production; 25,000 units completed and transferred out and 5,000 units 100% completed as to materials and 40% completed as to conversion costs.

Manufacturing Costs: Materials added at beginning of process, $90,000; labor, $75,000; overhead $60,000.

Instructions

Prepare a production cost report for the month of May.

Ex. 184

Romero Company—Perth Division is a new state of the art production facility that manufactures landing gears for airplanes. The September 30 ending work in process inventory is comprised of labor and overhead and is approximately 60% complete as to conversion costs. All materials are assumed to be 100% complete. Total materials costs during the period totaled $840,000.

Instructions

As the new plant accountant, you are asked to complete the production cost report which appears as follows:

Ex. 184 (cont.)

ROMERO COMPANY—Perth Division

Assimilation Department

Production Cost Report

For the Month Ended September 30, 2022

Equivalent Units

QUANTITIES Physical Units Materials Conversion Costs

Units to be accounted for

Work in process inventory, 9/1 300

Started into production 1,100

Total units to be accounted for 1,400

Units accounted for

Completed and transferred out 900 900 900

Work in process inventory, 9/30 500 500

Total units accounted for 1,400 1,400

COSTS

Unit Costs Materials Conversion Costs Total

Costs in September $840,000 $ $1,104,000

Equivalent units of production

Unit costs $ $ 220 $

Costs to be accounted for

Work in process inventory, 9/1 $ 243,400

Started into production

Total costs to be accounted for $

Cost Reconciliation Schedule

Costs accounted for

Completed and transferred out $

Work in process inventory, 9/30

Materials $

Conversion costs 66,000

Total costs accounted for $1,104,000