Weygandt, Kimmel &Kieso/ Managerial Accounting Tools for business decision making

TUTORIAL 3

CHAPTER 3 PROCESS COSTING

1 Robert Mallory has prepared the following list of statements about process cost
Accounting:

1. Process cost systems are used to apply costs to similar products that are mass-
produced in a continuous fashion.

2. A process cost system is used when each finished unit is indistinguishable from
another unit.

3. Companies that produce soft drinks, motion pictures, and computer chips would all
use process cost accounting.

4. In a process cost system, costs are tracked by individual jobs.

5. Job order costing and process costing track different manufacturing cost elements.

6. Both job order costing and process costing account for direct materials, direct
labor, and manufacturing overhead.

7. Costs flow through the accounts in the same basic way for both job order costing
and process costing.

8. In a process cost system, only one work in process account is used.

9. In a process cost system, costs are summarized in a job cost sheet.

10. In a process cost system, the unit cost is total manufacturing costs for the period
divided by the equivalent units produced during the period.

Instructions:

Identify each statement as true or false. If false, indicate how to correct the statement.

2 Schrager Company has two production departments: cutting and assembly. July 1
inventories are Raw materials $4,200, Work in process_Cutting $2,900, Work in
process_Assembly $10,600 and Finished goods $31,000. During July, the following
transactions occurred.

1. Purchased $62,500 of raw materials on account.

2. Incurred $60,000 of factory labor. (credit wages payable)
3. Incurred $70,000 of manufacturing overhead; $40,000 was paid and the remainder is
unpaid.
4. Requisitioned materials for Cutting $15,700 and Assembly $8,900.

1
 Weygandt, Kimmel &Kieso/ Managerial Accounting Tools for business decision making

5. Used factory labor for Cutting $33,000 and Assembly $27,000.

6. Applied overhead at the rate of $18 per machine hour. Machine hours were Cutting
1,680 and Assembly 1,720.
7. Transferred goods costing $67,600 from the Cutting department to the Assembly
department.
8. Transferred goods costing $134,900 from Assembly to Finished goods.
9. Sold goods costing $150,000 for $200,000 on account.

Instructions: Journalize the transactions. (Omit explanations)

3 Harrelson Company manufactures pizza sauce through two production departments:

Cooking and Canning. In each process, materials and conversion costs are incurred evenly
throughout the process. For the month of April, the work in process accounts show the
following debits:

Cooking Canning
Beginning work in process $ -0- $4,000
Materials 21,000 9,000
Labor 8,500 7,000
Manufacturing overhead 31,500 25,800
Costs transferred in 53,000

Instructions: Journalize the April transactions.

4 KM Company had the following department information about physical units and
percentage of completion:
Physical Units
Work in process, December 1 (80%) 180,000
Completed and transferred out 450,000
Work in process, December 31 (30%) 150,000

Materials are added at the beginning of the production process.

Instructions:

1. Determine the number of physical units started into production in December.

2. What is the total number of equivalent units for materials and for conversion during
December?

2
 Weygandt, Kimmel &Kieso/ Managerial Accounting Tools for business decision making

5 The ledger of American Company has the following work in process account.
Work in Process—Painting

5/1 Balance 3,590 Transferred out?

5/31 Materials 5,160

5/31 Labor 2,530

5/31 Overhead 1,380

5/31 Balance?

Production records show that there were 400 units in the beginning inventory, 30%
complete, 1,600 units started, and 1,700 units transferred out. The beginning work in
process had materials cost of $2,040 and conversion costs of $1,550. The units in ending
inventory were 40% complete. Materials are entered at the beginning of the painting
process.

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 transferred out in May?
e. What is the cost of the May 31 inventory?
f. Prepare a production cost report.

6 In the shaping Department of XYZ Company, the unit materials cost is $8.00 and the unit
conversion cost is $10.00. The department transferred out 70,000 units and had 12,500 units
in ending work in process 90% complete.

Instructions: If all materials are added at the beginning of the process, calculate the total
cost to be assigned to the units transferred out.

7 Material costs of $250,000 and conversion costs of $260,000 were charged to a processing
department in the month of September. Materials are added at the beginning of the
process, while conversion costs are incurred uniformly throughout the process. There were
no units in beginning work in process, 50,000 units were started into production in
September, and there were 4,000 units in ending work in process that were 50% complete at
the end of September.

3
 Weygandt, Kimmel &Kieso/ Managerial Accounting Tools for business decision making

Instructions: What was the total amount of manufacturing costs assigned to the 4,000 units
in the ending work in process?

8 The cutting department of Cassel Company has the following production and cost data for
July.

Production Costs
1. Transferred out 12,000 units Beginning work in process $0
2. Started 3,000 units that are 60% complete Materials 45,000
as to conversion costs and 100% complete Labor 16,200
as to materials at July 31. Manufacturing overhead 18,300

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

9 Overton Company provided the following information:

Units in beginning work in process 20,000

Units started into production 164,000

Units in ending work in process 24,000

Percentage of completion in ending work in process:

Conversion costs 60%

Materials 100%

Costs incurred:

Direct materials $101,200

Direct labor $164,800

Overhead $184,000

Instructions:

a. Compute the equivalent units of production for materials and for conversion costs.
b. Determine the production cost per unit.

4
 Weygandt, Kimmel &Kieso/ Managerial Accounting Tools for business decision making

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