ACG 4361

CHAPTER 17 STUDY PROBES SOLUTION

Problem 1. Production data for the Mashing Department for November, Dignan's first
month of operations follows:
Costs charged in November:
Materials
Labor
Overhead

$27,936
6,400
15,032

During this first month of operations, 4,000 units were started into production. During
November, 3,400 units were completed. The remaining units are 80% completed with
respect to materials and 60% complete with respect to conversion costs.
How much is the total cost of the units completed under the weighted average method
of process costing in the Mashing Department?
$43,860
First track the physical flow, then collect the costs to allocate separately for materials
($27,396) and for conversion costs ($6,400 + $15,032). Calculate the rate per
equivalent unit and then allocate the costs to units completed during the month. Note
that the entire production report is presented though not required.

Total
Equivalent units
Beginning inventory
Started during November
Units to account for

0
4,000
4,000

Completed & trans. out

Ending WIP
Units accounted for

3,400 100%
600 80%
4,000

Materials

3,400 100%
480 60%
3,880

Conversion
Costs

3,400
360
3,760

Costs to be allocated
Beginning inventory
Costs incurred
Costs to account for

$0
$27,936
$27,936

$0
$21,432
$21,432

Costs to account for

Equivalent units
Rate per equivalent unit

$27,936
3,880
$7.20

$21,432
3,760
$5.70

Costs accounted for

Units transferred out

$24,480

$19,380

$7.20*3,400

$5.70*3,400

$3,456

$2,052

$7.20*480

$5.70*360

Units in ending WIP

Costs accounted for

Problem 2. Dingo Company has three departments--assembly, checking, and

packaging, and it uses the weighted average method of process costing. The assembly
department had 7,500 units in beginning inventory. Associated with these beginning
units were $20,200 in direct materials and $25,000 in conversion costs. During the
period, the department incurred $79,800 in direct materials and $151,800 in conversion
costs and started 50,000 units. Ending inventory consisted of 2,000 units which were
60% complete with respect to conversion costs. Dingo adds materials when the units
are 20% complete. Calculate the following for the assembly department for the month:
a.
b.
c.
d.

Calculate the equivalent units for materials and conversion costs.

Calculate the cost per equivalent unit for materials and conversion costs.
Calculate the cost of units transferred out.
Calculate the cost of the ending work in process.

a.
Beginning work in process
Units started
Units to account for
Units completed
Ending work in process
Units accounted for

Physical Flow
7,500
50,000
57,500
55,500
2,000
57,500

100%
100%

Materials

55,500
2,000
A 57,500

100%
60%

Conversion

55,500
1,200
A 56,700

b. Costs
Beginning work in process
Cost incurred during period
Costs to account for

Materials
$20,200
79,800
$100,000

Conversion
$25,000
151,800
$176,800

Cost per unit

Costs to account for
Equivalent units
Cost per equivalent unit

$100,000
57,500
B $1.7391

$176,800
56,700
B $3.1182

$96,520

$173.060

55,500*$1.7391

55,500*$3.1182

c. Cost of units transferred out

Total

$276,800

C
$269,580

d. Cost of ending WIP

$3,478
2,000*$1.7391

3,742

1,200*$3.1182

Costs accounted for

$276,800

Problem 3 - Foretold Corporation has three departments in which it produces widgets-cutting, molding, and packaging. On November 1, Foretold Corporations packaging
department had Work in Process inventory of 6,000 units that were 75% complete with
respect to materials and 30% complete with respect to conversion costs. The cost of
these units was $93,525 ($60,000 transferred in from previous departments, $26,775 in
materials, and $6,750 in labor and overhead). During November, 125,000 units were
transferred into packaging from molding. These units had accumulated costs in previous
departments of $1,218,560. The packaging department incurred costs of $756,225 for
materials and $488,010 for conversion costs in November, and transferred 130,000
units out of the department during the period. The units remaining in ending inventory
are 20% complete with respect to conversion costs. One-half of the materials have been
added during November. Foretold uses the weighted average method of process
costing.
a. How much is the cost per equivalent unit for transferred-in costs, material, and
conversion costs in the packaging department in November?
b. How much is the cost of the units transferred out of the packaging department in
November?
c. How much is reported on the balance sheet for WIP at November 30 for the
packaging department?
Transferred in

DM

Beginning WIP
Units started

6,000
125,000

Units to account for

131,000

Units started and

completed

130,000

100%

130,000

100%

1,000

100%

1,000

50%

Ending WIP
Units accounted for
Costs to be accounted
for
Beginning WIP
Added during period

7,220

131,000

130,00
0
50
0

131,000

130,500

60,000

$ 26,775
756,22
5

1,218,560

CC

100%

130,000

20%

200
130,200

6,750

488,010

Costs to be accounted for

$1,278,560

$783,000

$1,278,560

$783,000
130,50
0

$494,760

$2,556,320

Cost per unit:

Costs incurred
EUP

131,000

Cost per unit A

9.76

6.00

$494,76
0
130,200
$

3.80

Cost of units transferred out:

EUP

130,000
$9.76

130,000
$6.00

130,000
$3.80

$ 1,268,800

$780,000

$494,000

Cost per unit

1,000
$ 9.76

500
$ 6.00

200
$ 3.80

Cost transferred out

$9,760

$ 3,000

Cost per unit

Costs transferred out
Cost of ending WIP
EUP

B $2,542,80
0

760

Costs accounted for

13,520
C
$2,556,320

d. List the amounts that would be posted on the debit side of the WIP t-account for the
packaging department during November.
$1,218,560 + $756,225 + $488,010

Problem 4 Jones, Inc. uses a weighted average process costing system. The company
has three departments--washing, mixing, and chopping. During May, 4,200 units were
transferred into the mixing department from the washing department at a cost of
$31,790. Direct materials are added when the process is 40% complete. Additional
information follows for the mixing department:
On May 1:

Beginning inventories = 1,000 units, 45% complete

Direct materials costs = $4,800
Conversion costs = $4,780
Transferred-in costs = $11,370

During May: Direct materials costs incurred = $22,825

Conversion costs incurred = $31,500
On May 31: Ending inventory = 950 units, 25% complete
A. In good form, summarize total physical and equivalent units for the mixing
department for May.

Physical
Flow

Units in beg.work in
process
Units started
Units to account for

1,000
4,200
5,200

Units completed

4,250

Units in ending WIP

Units accounted for

950
5,200

100
%
100
%

Transf. in

4,250

Materials

100
%

950 0%
5,200

Conversion

4,250 100%

4,250

0
4,250

238
4,488

25%

*Transferred in units are treated as a separate DM as if the materials are added at the
beginning of the process.
B. In good form, calculate costs to account for and compute costs per equivalent unit
for the mixing department for May.
Costs
Beginning work in process
Cost incurred during period
Costs to account for
Cost per unit
Total costs
Total EUP
Cost per equivalent unit

Transf. in

Materials

Conversion

Total

$11,370
31,790
$ 43,160

$ 4,800
22,825
$27,625

$ 4,780
31,500
$36,280

$107,065

$43,160
5,200
$8.30

$27,625
4,250
$6.50

$36,280
4,488
$8.0838

$22.8838

Problem 5 Sit-Down Company manufacturers a standard recliner in three

departments--assembly, upholstery, and hardware. During February, the firm's
assembly department started production of 75,000 chairs. During the month, the
assembly department completed 80,000 chairs, and transferred them to the hardware
department. The assembly department ended the month with 10,000 chairs in ending
inventory. There were 15,000 chairs in beginning inventory in the assembly department.
All direct materials costs are added at the beginning of the production cycle and
conversion costs are added uniformly throughout the production process. The FIFO
method of process costing is used. In the assembly department, beginning work in
process was 30% complete as to conversion costs, while ending work in process was
80% complete as to conversion costs. The following is provided for the assembly
department during the month of February:
Beginning inventory:
Direct materials
$24,000
Conversion costs
$35,000

Manufacturing costs added during the accounting period:

Direct materials
$168,000
Conversion costs
$278,000
A. Prepare a production cost report for the month of February for the assembly
department.
Materia
ls

Units

Conver
sion

15,0
Beginning WIP

00

Units started
Units to be
accounted for

00

75,0
90,0
00
15,0
Beginning WIP
Started and
completed

00

0%

65,0
00
10,0

Ending WIP
00
Units accounted
90,0
for
00
Costs to account
for
Beginning
WIP
Added during
period
Costs to account
for

Cost per unit:

70
% 00

100
% 00

65,0 100

100
% 00

10,0 80

EUP
Cost per
EUP

65,0

% 00

8,0

% 00

75,0
00

$ 24,00
0
168,0
00
$192,0
00
Costs
added

10,5

$168,0
00
75,0
00
$ 2.240
0

83,5
00

$ 35,0
$
00 59,000
278,0
00
$313,0 $505,00
00
0
$278,
000
83,5
00
$
3.32934

Costs transferred
out:
Beginning inventory

EUP
Cost per
unit

65,0
00
$2.240
00

$59,000
75,5
00
$3.329
34

DM

CC

$145,6
00

$251,3
65

10,0
00
$2.240
00
$ 22,4
00

8,0
00
$3.329
34
$ 26,6
35

396,
965
455,
965

Costs transferred
out
Cost in ending
WIP

EUP
Cost per
unit

Costs accounted
for

49,
035
$505,00
0

Answer the following for the assembly department during February:

B. How many of the units that were started during February were completed during
February?
75,000 - 10,000 = 65,000
The 10,000 units in WIP are incomplete.
C.

What were the equivalent units for conversion costs during February?
(15,000 0.7) + 65,000 + (10,000 0.8) = 83,500

D. What is the amount of direct materials cost assigned to ending work-in-process

inventory at the end of February?
$168,000/75,000 = $2.24 10,000 = $22,400
E. What is the cost of the goods transferred out of the assembly department during
February?
See above in yellow. $455,965
Problem 6 Aero Flyer company manufacturers replica plastic airplane and motorized
vehicle models in three departments--assembly, motorizing, and finishing. During
October, the firm's assembly department started production of 60,000 models. During
the month, the assembly department completed 66,000 models, and transferred them to
the motorizing department. The assembly department ended the month of October with
22,000 models in ending inventory. There were 28,000 models at October 1 in the
assembly department. All direct materials costs are added when the units are 20%
through the process, and conversion costs are added uniformly throughout the
production process. The FIFO method of process costing is used by Aero. Beginning
work in process was 25% complete as to conversion costs, while ending work in

process was 50% complete as to conversion costs for the assembly department. Costs
for the assembly department for the month of October follow:
Beginning inventory:
Direct materials costs
$39,200
Conversion costs
$30,800
Manufacturing costs added during October:
Direct materials costs
$90,000
Conversion costs
$280,000
Calculate the following for the month of October for the assembly department:
A. How many of the units that were started during October were completed during
October?
60,000 - 22,000 = 38,000
B. What were the equivalent units for conversion costs during October?
70,000
C. What is the cost of the goods transferred out during October? $363,000
A partial production cost report is prepared to show the calculations of the solutions:
DM
Beginning WIP
Units started
Units to be accounted for

28,000
60,000
88,000

Beginning WIP
Started and completed
Ending WIP
Units accounted for

28,000
38,000
22,000
88,000

0%
100%
100%

Costs to be accounted for

Beginning WIP
Added during period
Costs to be accounted for
Costs per unit:

Costs added
EUP
Cost per unit

Transferred out cost:

Beg inventory

38,000
22,000
60,000

CC

75%
100%
50%

21,000
38,000
11,000
70,000

$ 39,200
90,000
$129,200

$ 30,800
280,000
$310,800

$90,000
60,000
$1.50

$280,000
70,000
$4.00

$70,000
$440,000

70,000

Layer:

$1.50*38000 =

57,000

$4.00*(21,000+38000)
+

236,000

Costs transferred out

293,000
$ 363,000

Problem 7 Pet Products Company uses an automated process to manufacture its pet
products. For June, the company had the following activities in department 2:
Beginning work in process inventory
Units transferred in from dept. 1

4,500 items, 1/4 complete

15,000 units

Units completed
Ending work in process inventory

17,500 units
2,000 items, 3/4 complete

Cost of beginning work in process

Direct material costs, current
Conversion costs, current

$5,250
$16,500
$23,945

Direct materials are placed into production at the beginning of the process and
conversion costs are incurred evenly throughout the process. Prepare the physical and
equivalent units section of the production cost report using the FIFO method for
Department 2 for June.
Transferred in
Beginning WIP
Units started
Units to account for

4,500
15,000
19,500

Beginning WIP
Started and completed
Ending WIP
Units accounted for

4,500 0%
13,000
13,000
100%
2,000
2,000
100%
19,500
15,000

Materials

0%
100%
100%

13,000
2,000
15,000

Conversion Cos

75%
100%
75%

Under FIFO, the ending WIP units have begun, so 100% of the effort is assumed to be
performed during June. The beginning units were started during a previous month, so
no additional materials have been added during June. The EUP are 0% for DM because
100% of the materials are assumed to be added for the units in the previous period
(May)--the period during which they were started.

Problem 8 Taco Ranch uses a process cost system. Production begins in the Crafting
Department where materials are added at the beginning of the process and conversion

3,375
13,000
1,500
17,875

costs are incurred uniformly throughout the process. On November 1, the beginning
work in process inventory consisted of 5,000 units which were 60% complete and had a
cost of $190,000, $100,000 of which were materials costs. During November, the
following occurred in the crafting department:
Materials added in November
Conversion costs incurred in November
Units completed and transferred out in November
Units in ending work in process November 30 (20% complete)

$225,000
$45,000
20,000
12,500

A. Prepare a production cost report using weighted average cost flow for the crafting
department for November. Answer the following questions.
1. What are the equivalent units of production for materials and conversion costs in
the crafting department for the month of November?

2. What are the costs assigned to the ending work in process inventory on
November 30?

3. What are the costs assigned to units completed and transferred out during
November?
Direct materials

Weighted Average
Beginning WIP
Started
Units to account for

5,000
27,500
32,500

Comp. & TO
Ending WIP
Units accounted for

20,000
12,500
32,500

100%
100%

20,000
12,500
32,500

Conversion Costs

100%
20%

20,000
2,500
22,500

Costs to be accounted for:

Beginning inventory
Added
Costs to be accounted for

$100,000
225,000
$325,000

$90,000
45,000
$135,000

Cost per EUP:

Costs to be accounted for
EUP
Per unit cost

$325,000
32,500
$10.00

$135,000
22,500
$6.00

A1

A1

Costs accounted for:

Completed and transferred out:

20,000*$10

20000*$6

$200,000
Ending work in process:

12500*$10

$120,000

2500*$6

$125,000

$15,000

Costs accounted for

B. Prepare a production cost report using a FIFO cost flow for the crafting department
for November.
FIFO
Beginning inventory
Started
Units to account for

Beginning WIP
Comp. & TO
Ending WIP
Units accounted for

Direct materials

5,000
15,000
12,500
32,500

15,000
12,500
27,500

0%
100%
100%

Costs to be accounted for:

Beginning inventory
Added

Per unit cost

Costs accounted for:
Completed and transferred out:
Beg. WIP
Costs added

2,000
15,000
2,500
19,500

40%
100%
20%

$ 100,000
225,000
$325,000

$90,000
45,000
$135,000

$225,000
27,500
$8.181818

$ 45,000
19,500
$2.307692

Costs to account for

Cost per EUP:
Costs added
EUP

Conversion Costs

5,000
27,500
32,500

15,000*$8.1818181

17000*$2.307892

$122,727

$39,231

12500*$8.1818181

2500*$2.307892

Completed & transferred out

Ending work in process:

$102,273
Costs accounted for

*rounding

$5,769

C. Draw a Work in Process t-account for the Crafting Department and post the
respective amounts to it during November under the FIFO method.
WIP - Crafting
190,000
225,000
45,000
351,958
108,042

Problem 9. North Face makes 3 flavors of coffee-Macadamia nut, French vanilla, and
Columbian. All flavors go through the same assembly line but they differ as to the
materials used. All models utilize all processes. North Face uses operation costing and
allocates conversion costs using one cost pool based on the number of pounds
processed. The following information is provided:
Macadamia Nut

Materials
Pounds processed

$16,200
3,600

French
Vanilla

$10,500
2,800

Columbian

$17,920
5,600

Total

$44,620
12,000

Direct labor costs

$13,000

Overhead costs:
Cleaning
Roasting
Flavoring
Packaging
Total

11,000
14,000
13,400
12,800
$51,200

How much is the cost per unit of each pound of French Vanilla coffee?

The conversion costs MUST be allocated in one pool since this company is using
operation costing.

Rate = ($13,000 + $51,200)/12,000 = $5.35 per pound

Direct materials
Conversion costs

$10,500/2,800 pds.

$3.75
5.35

Total cost per pound

$9.10

Problem 10. Surf Products manufactures two styles of board shorts. The standard style
is made of microfiber. The quick dry style is made of polyester/spandex. All other
components of both brands are identical. During July, a total of 3,600 standard style
shorts were manufactured with a materials cost of $7,920, and 1,600 pairs of quick dry
were manufactured with a materials cost of $11,520. Conversion costs are allocated
based on the number of pairs of board shorts produced. During July, $7,800 of factory
overhead and $8,320 of direct labor were incurred in manufacturing the board shorts.
Show the calculation of the cost of each pair of quick dry board shorts during the month
of July using operation costing.

Conversion cost rate = ($7,800 + $8,320) / (3,600 + 1,600) = $3.10 per pair
Unit cost = ($11,520/1,600) + $3.10 = $10.30 each
Note: Conversion costs must be in ONE cost pool for allocation purposes.

Problem 11. Chief Deli creates deli platters for catering services. The deli platter orders
require the same assembly operations but different ingredients. The company uses
operation costing and assigns conversion costs based on the pounds of meat used. The
following information was available for May orders:
Order
Order 328
Total
324
Pounds of deli meats
1,120
480
1,600
Cost per pound of deli meat
$4.80
$5.50
Direct labor hours
162
Labor cost per hour
$15.00
Total production overhead costs
$1,650
Show the calculation of the unit product cost of Order 328.
With operations costing, conversion costs are allocated to products and direct materials
are traced.

Conversion costs rate:

Direct labor: 162*$15.00
Overhead:
Total conversion costs to be allocated
Cost driver - pounds of deli meat

$2,430
1,650
$4,080
1,600
$2.55 per pound of deli meat

Order 328:
DM 480*$5.50
DL & Overhead: $2.55*480
Total cost of order 328
Note: Conversion costs must be in ONE cost pool for allocation purposes.

Multiple Choice

1. When using weighted average process costing

A. The costs attached to beginning work in process are kept separate from all other
costs.
B. The current period costs will be added to the beginning work in process costs.
C. Units in the ending inventory are not considered in making equivalent unit
computations.
D. Transferred-in units are always the same percentage complete for materials and
conversion costs as for conversion costs.
2. Which of the following statement (s) concerning conversion costs is correct?
A. Estimating the degree of completion of direct materials in a partially completed
unit is usually easier to calculate than estimating the degree of completion for
conversion costs.
B. Companies that produce homogeneous products incur no conversion costs.
C. Estimates are not considered acceptable for GAAP purposes.
D. Both (b) and (c) are correct.
3. Under the weighted-average method, the stage of completion of beginning work in
process
A. is relevant in determining the equivalent units.
B. must be combined with the work done during the current period in determining
the equivalent units.
C. is irrelevant in determining the equivalent unit calculation.
D. impacts the cost per equivalent unit.
4. Operation costing systems are used when the products have
A. used a standardized method of processing that is repeatedly performed.
B. common characteristics and no individual characteristics.
C. individual characteristics and no common characteristics.
D. been mass produced in a continuous production process.
E. some common characteristics and some individual characteristics.
They are often referred to as hybrid systems.

$2,640
1,224
$3,864

5. Which of the following are considered alternative options when a company is

selecting an option to operation costing?
A. Variable costing and throughput costing
B. Absorption costing and variable costing
C. Job costing and process costing
D. Process costing and throughput costing
Absorption costing, variable costing, and throughput costing are methods of determining
which costs are considered to be product costs vs. period costs. Job costing, process
costing, and operation costing differ in which costs are traced to products and which
costs are allocated.
6. Additional materials are added in the second department of a four-department
production process. This addition does not increase the number of units being produced
in the second department. This will
A. increase the equivalent units of production.
B. increase the cost per unit.
C. decrease the value of the transferred-in costs.
D. decrease the total costs to account for.
Costs added will increase, leading to an increase in the cost per unit.
7. In a production cost report using FIFO process costing, transferred-in costs are most
similar to
A. material added at the beginning of the process.
B. conversion costs added during the process.
C. costs transferred-out to the next process.
D. costs included in beginning inventory.
8. The loan department of a financial corporation makes loans to businesses. The costs
of processing these loans are often several thousand dollars. All loans are initially
evaluated using the same financial analysis software, but some require outside services
such as appraisals and legal services. Which is the most appropriate costing system for
the loan department?
A. job-order costing
B. process costing
C. operation costing
D. batch costing
9. In the manufacturing operations of a company using process costing,
A. there will be multiple work in process accounts in the general ledger.
B. direct material and direct labor are referred to as conversion costs.
C. transferred in costs occur only in the departments that have no direct labor costs.
D. the process costing system can only be used until the point where the product
enters the packaging department.
There is one WIP account for each process. Direct material and direct labor are prime
costs.

10. When using weighted average process costing,

A. The costs attached to beginning work in process are kept separate from all other
cost
B. The current period costs will be added to the beginning work in process costs
C. Units in the ending inventory are not considered in making equivalent unit
computations
D. Ending WIP units are always 100% complete for materials.
When inspection occurs at different points throughout production, spoiled units
will be less than 100% complete.
11. Which of the following is the correct journal entry to transfer costs out of the
Finishing Department, the last processing department?
A. Debit Work in Process Inventory Finishing Department and credit Finished
Goods Inventory
B. Debit Cost of Goods Sold and credit Finished Goods Inventory
C. Debit Cost of Goods Sold and credit Work in Process Inventory Finishing
Department
D. Debit Finished Goods Inventory and credit Work in Process Inventory
Finishing Department
12. In a process costing system, transferred in costs
A. Are costs that are part of beginning inventory completed during the previous
period
B. Are costs for units that required no current period work
C. Are the costs recorded in preceding departments
D. Are the costs of the completed units
These costs must continue to be tracked as they are part of the cost of the products that
are not yet finished.
13. A distinct feature of the FIFO process costing method is that the
A. work done on beginning inventory before the current period is blended with the
work done during the current period in the calculation of equivalent units
B. work done on beginning inventory before the current period is kept separate from
the work done during the current period in the calculation of equivalent units
C. work done on ending inventory is kept separate from the work done during the
current period in the calculation of equivalent units and is not included in the equivalent
units calculation
D. units in ending inventory are excluded from the cost per equivalent unit
14. On occasion, the FIFO and the weighted-average methods of process costing will
result in the same dollar amount of costs being transferred to the next department.
Which of the following scenarios would have that result?
A. when the beginning and ending inventories are equal in terms of physical units
B. when the beginning and ending inventories are equal in terms of the percentage of
completion for both direct materials, and conversion costs
C. when there is no ending inventory

D. when there is no beginning inventory

15. In the computation of the cost per equivalent unit, the FIFO method of process
costing considers
A. all the costs entering work in process from the units in beginning inventory plus
the costs for the work completed during the current accounting period.
B. all the costs that have entered work in process during the current accounting
period.
C. all the costs that have entered work in process during the current accounting
period from the units started or transferred in minus the costs associated with
ending inventory.
D. all the costs that have entered work in process during the current accounting
period plus the costs associated with beginning inventory.
16. Under the FIFO process costing method, the stage of completion of beginning work
in process
a. is relevant in determining the equivalent units.
b. must be must be added to the work done during the current period in
determining the equivalent units.
c. is irrelevant in determining the equivalent unit calculation.
d. has no effect on the cost per equivalent unit.

True False Questions

1. The weighted-average method assumes all beginning units are completed during the
previous month.
False.
2.

Examples of industries that would use process costing include the pet food
industry.
True.
3.

The principal difference between process costing and job costing is that in job
costing an averaging process is used to compute the unit costs of products or
services.
False.
4.

In weighted average process costing, equivalent units in beginning work in process

plus units started during the current period equals equivalent units completed and
transferred out in the current period minus equivalent units in ending work in
process.
False.

5.

In the weighted average costing method, the costs of direct materials in beginning
inventory are not included in the cost per unit calculation if direct materials are
added at the start of the production process.
False.