Garrison10ce SM Ch06 FINAL R

Chapter 6
Systems Design: Process Costing
Exercise 6-1 (20 minutes)

a. To record issuing raw materials for use in production:
Work in Process—Moulding Department 28,000
Work in Process—Firing Department 5,000
Raw Materials 33,000
b. To record direct labour costs incurred:

Wages Payable 23,000
c. To record applying manufacturing overhead:

Manufacturing Overhead 61,000
d. To record transfer of unfired, molded bricks from the Molding Department to the Firing Department:
e. To record transfer of finished bricks from the Firing Department to the finished goods warehouse:
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Solutions Manual, Chapter 6 1
Finished Goods 108,000
f. To record Cost of Goods Sold:

Cost of Goods Sold 106,000

2 Managerial Accounting, 10th Canadian Edition
Weighted-Average Method
Costs per Equivalent Unit:
Total
Cost Materials Labour Overhead
Work in process, May 1........$156,270 $ 14,550 $23,620 $118,100
Cost added during May........ 174,330 88,350 14,330 71,650
Total cost (a)......................$330,600 $102,900 $37,950 $189,750
Equivalent units of
production (b)................... ----- 1,200 1,100 1,100
Cost per equivalent unit -----
(a) ÷ (b).......................... $85.75 $34.50 $172.50
Total cost per equivalent Unit = $85.75 + $34.50 + $172.50 = $292.75

Work in Process—Mixing 330,000
Raw Materials Inventory 330,000
Work in Process—Baking 120,000
Wages Payable 380,000

Equivalent Units (EU)

Labour &
Materials Overhead
Litres transferred to the Heating Department
during October*.................................................. 45,000 45,000
Work in process, October 31:
Materials: 5,000 litres × 100% complete............... 5,000
Labour and overhead: 5,000 litres × 70%
complete.......................................................... 3,500
Equivalent units of production................................. 50,000 48,500
* Beginning WIP 25,000 + Started 25,000 – Ending WIP 5,000 = 45,000 litres .

Cost Reconciliation
Total Cost Materials Conversion

Cost accounted for as follow:
Transferred to Packaging
Dept:
45,000 rolls x $14.50 $652,500 45,000 45,000
Work in process, January 31:
Materials, $10.50 per EU $42,000 4,000
Conversion , $4.00 per EU $12,800 3,200
54,800
Total cost accounted for $707,300

Problem 6-11 (45 minutes)
1. Equivalent Units of Production

Material Conversio
s n
Transferred to next department*..................... 395,000 395,000
Ending work in process:
Materials: 55,000 units × 65% complete........ 35,750
Conversion: 55,000 units × 30% complete..... 16,500
Equivalent units of production.......................... 430,750 411,500
*Units transferred to the next department = Units in beginning work in process + Units started into
production − Units in ending work in
process = 85,000 + 365,000 − 55,000 = 395,000
2. Cost per Equivalent Unit

Materials Conversio
n
Cost of beginning work in process................. $ 101,000 $ 51,000
Cost added during the period........................ 462,000 213,000
Total cost (a)............................................... $563,000 $264,000
Equivalent units of production (b)................. 430,750 411,500
Cost per equivalent unit, (a) ÷ (b)................ $1.31 $0.64*

*rounded

Problem 6-11 (continued)
3. Cost of Ending Work in Process Inventory and Units Transferred Out

Materials Conversio Total
n
Ending work in process inventory:
Equivalent units of production
(materials: 55,000 units × 65%
complete; conversion: 55,000 16,500
units × 30% complete)....... 35,750
Cost per equivalent unit........ $1.31 $0.64
Cost of ending work in process
inventory........................... $46,833 $10,560 $57,393
Units completed and transferred out:
Units transferred to the next 395,000 395,000
department........................
Cost of units completed and
transferred out................... $517,450 $252,800 $770,250

4 Cost Reconciliation
.
Costs to be accounted for:
Cost of beginning work in process inventory
($101,000 + $51,000).................................... $152,000
Costs added to production during the period
($462,000 + $213,000).................................. 675,000
Total Cost $827,000
Costs accounted for as follows:

Transferred to the Coating Department
395,000 x $1.95 $770,250
Work in process, May 31
Materials at $1.31 per EU 46,833
Conversion at $0.64 per EU 10,560
Total ending Work in process 57,393
Total cost *$827,643
*Difference of $643 due to rounding of the per unit costs


Material Conversio
s n
Transferred to next department*..................... 270,000 270,000
Materials: 45,000 kilograms × 100% complete.. 45,000
Conversion: 45,000 kilograms × 2/3 complete... 30,000
Equivalent units of production.......................... 315,000 300,000
*35,000 + 280,000 – 45,000 = 270,000.

Materials Conversio
n
Cost of beginning work in process................. $ 43,400 $ 20,300
Cost added during the period........................ 397,600 189,700
Total cost (a)............................................... $441,000 $210,000
Equivalent units of production (b)................. 315,000 300,000
Cost per equivalent unit, (a) ÷ (b)................ $1.40 $0.70
3. Cost of Ending Work in Process Inventory and Units Transferred Out

n
Equivalent units of production
(see above)........................ 45,000 30,000
Cost of ending work in process
inventory........................... $63,000 $21,000 $84,000
Units transferred to the next
department........................ 270,000 270,000
Cost per equivalent unit........ $1.40 $0.70 $2.10
Cost of units completed and
transferred out................... $378,000 $189,000 $567,000

4. In computing unit costs, the weighted-average method mixes costs of the prior period with current
period costs. Thus, under the weighted-average method, unit costs are influenced to some extent by
what happened in a prior period. This problem becomes particularly significant when attempting to
measure performance in the current period. Good (or bad) cost control in the current period might be
concealed by the costs that have been brought forward in the beginning inventory.

1.
a. Work in Process—Blending 495,000
Work in Process—Bottling 115,000
Raw Materials 610,000
b. Work in Process—Blending 72,000
Salaries and Wages Payable 90,000
c. Manufacturing Overhead 225,000
Accounts Payable 225,000
d. Work in Process—Blending 181,000
e. Finished Goods 950,000

Accounts Receivable 1,500,000
Sales 1,500,000
Cost of Goods Sold 890,000

2.
Work in Process—Bottling Work in Process—Blending
Bal. 65,000 (e) 950,000 Bal. 38,000 Part 4 740,000
(a) 115,000 (a) 495,000
(b) 18,000 (b) 72,000
(d) 42,000 (d) 181,000
Part 4 740,000
Bal. 30,000 Bal. 46,000
Manufacturing Overhead Finished Goods

(c) 225,000 (d) 181,000 Bal. 20,000 (f) 890,000
(d) 42,000 (e) 950,000
Bal. 2,000 Bal. 80,000
Raw Materials Accounts Payable

Bal. 681,000 (a) 610,000 (c) 225,000
Bal. 71,000

Salaries and Wages Payable Sales
(b) 90,000 (f) 1,500,000
Accounts Receivable Cost of Goods Sold

(f) 1,500,000 (f) 890,000

3. Production Report – Blending Department
Quantity
Schedule
Units to be accounted for:
Work in process, March 1 20,000
Started into production 390,000
Total Units 410,000
Equivalent Units (EU)
Material Labour Overhead
Units accounted for as follows:
Transferred to Bottling 370,000 370,000 370,000 370,000
Work in process March 31 40,000 30,000 10,000 10,000
Total units and equivalent
units of production 410,000 400,000 380,000 380,000
Costs per Equivalent Unit:
Total cost Material Labour Overhead
Cost to be accounted for:
Work in process, March 1 $38,000 $25,000 $4,000 $9,000
Cost added by the Blending
Department
748,000 495,000 72,000 181,000
Total Cost $786,000 $520,000 $76,000 $190,000
Equivalent units of production 400,000 380,000 380,000
Cost per equivalent unit $1.30 $0.20 $0.50
4. Units transferred to bottling 370,000 x ($1.30 + $0.20 +$0.50)

Work in Process—Blending 740,000

Case 6-17 (45 minutes)
1. The revised computations follow:
Quantity Schedule and Equivalent Units of Transferred Conversio

Production In Materials n
Transferred to next department....................... 100,000 100,000 100,000
Transferred in: 5,000 units × 100% complete. 5,000
Materials: 5,000 units × 0% complete............ 0
Conversion: 5,000 units × 2/5 complete.......... 2,000
Equivalent units of production.......................... 105,000 100,000 102,000
Costs per equivalent unit Transferred Conversio

In Materials n
Cost of beginning work in process................... $ 8,820 $ 3,400 $ 10,200
Cost added during the period.......................... 81,480 27,600 96,900
Total cost (a)................................................. $90,300 $31,000 $107,100
Equivalent units of production (b)................... 105,000 100,000 102,000
Cost per equivalent unit, (a) ÷ (b).................. $0.86 $0.31 $1.05

Case 6-17 (continued)
Transferred
Cost reconciliation In Materials Conversion Total
Units transferred to the next department......... 100,000 100,000 100,000
Cost per equivalent unit.................................. $0.86 $0.31 $1.05 $2.22
Cost of units completed and transferred out.... $86,000 $31,000 $105,000 $222,000
Equivalent units of production (see above). . 5,000 0 2,000
Cost per equivalent unit............................. $0.86 $0.31 $1.05
Cost of ending work in process inventory.... $4,300 $0 $2,100 $6,400
$228,400
2. The unit cost computed above is $2.22 (= $0.86 + $0.31 + $1.05) versus $2.284 on the original
report. The unit cost on the report prepared by the accountant is high because none of the cost
incurred during the month was assigned to the units in the ending work in process inventory.

Appendix 6A – FIFO Method
Questions
6A-1 Under the weighted-average method, each unit transferred out of the department is counted as
one equivalent unit—regardless of in what period the work was done to complete the units. Under the
FIFO method, only the work done in the current period is counted. Units transferred out are divided into
two parts. One part consists of the units transferred out from beginning inventory. Only the work needed
to complete these units is shown as part of the equivalent units for the current period. The other part of
the units transferred out consists of the units started and completed during the current period.
6A-2 The weighted-average method mixes costs from the current period with costs from the prior
period. Thus, under the weighted-average method, the department’s apparent performance in the
current period is influenced to some extent by what happened in a prior period. In contrast, the FIFO
method cleanly separates the costs and work of the current period from those of the prior period. This
makes the FIFO method superior to the weighted-average method for cost control because current
performance should be measured in relation to costs of the current period only.

Exercise 6A-1 (10 minutes)
FIFO Method
Material Conversio
s n
To complete beginning work in process:
Materials: 400 units × (100% – 75%)................. 100
Conversion: 400 units × (100% – 25%).............. 300
Units started and completed during the period
(42,600 units started – 500 units in ending
inventory)......................................................... 42,100 42,100
Ending work in process
Materials: 500 units × 80% complete................. 400
Conversion: 500 units × 30% complete.............. 150
Equivalent units of production................................ 42,600 42,550

Exercise 6A-3(15 minutes)
FIFO Method
Material Conversio Total
s n
Equivalent units of production................ 800 200
Cost per equivalent unit......................... $4.40 $1.30
Cost of ending work in process inventory $3,520 $260 $3,780
Units transferred out:

Cost in beginning work in process
inventory.......................................... $2,700 $380 $3,080
Cost to complete the units in beginning
work in process inventory:
Equivalent units of production required
to complete the beginning inventory 400 700
Cost per equivalent unit....................... $4.40 $1.30
Cost to complete the units in beginning
inventory........................................ $1,760 $910 2,670
Cost of units started and completed this period:
Units started and completed this period
(8,000 units completed and
transferred to the next department
– 1,000 units in beginning work in
process inventory).......................... 7,000 7,000
Cost per equivalent unit....................... $4.40 $1.30
Cost of units started and completed
this period...................................... $30,800 $9,100 39,900
Total cost of units transferred out.......... $45,650

Exercise 6A-5 (45 minutes)
FIFO method
1. Computation of the total cost per equivalent unit of production:
Cost per equivalent unit of production for material............. $18.20
Cost per equivalent unit of production for conversion.......... 23.25
Total cost per equivalent unit of production....................... $41.45
2. Computation of equivalent units in ending inventory:

Materials Conversion
Units in ending inventory.......... 300 300
Percentage completed.............. 80% 40%
Equivalent units of production. . 240 120
3. Computation of equivalent units required to complete the beginning

inventory:
Materials Conversion
Units in beginning inventory..... 400 400
Percentage uncompleted.......... 30% 70%
Equivalent units of production... 120 280
4. Units transferred to the next department............. 4,400

Less units from the beginning inventory............... 400
Units started and completed during the period..... 4,000

Exercise 6A-5 (continued)
5. Material Conversio Total
s n
Equivalent units of production................................................... 240 120
Cost per equivalent unit............................................................ $18.20 $23.25
Cost of ending work in process inventory................................... $4,368 $2,790 $7,158
Cost from the beginning work in process inventory..................... $4,897 $2,989 $7,886
Cost to complete the units in beginning work in process inventory:
Equivalent units of production required to complete the units
in beginning inventory....................................................... 120 280
Cost per equivalent unit....................................................... $18.20 $23.25
Cost to complete the units in beginning inventory.................. $2,184 $6,510 8,694
Units started and completed this period................................. 4,000 4,000
Cost per equivalent unit....................................................... $18.20 $23.25
Cost of units started and completed this period..................... $72,800 $93,000 165,800
Total cost of units transferred out............................................. $182,380

Problem 6A-7 (45 minutes)
FIFO method
Material Conversio
s n
Materials: 50,000 units × (100% − 75%)...... 12,500
Conversion: 50,000 units × (100% − 30%)... 35,000
Units started and completed during the period
(430,000 units started − 100,000 units in
ending inventory).......................................... 330,000 330,000
Materials: 100,000 units × 60% complete...... 60,000
Conversion: 100,000 units × 40% complete. . 40,000
Equivalent units of production........................... 402,500 405,000

MaterialsConversio
n
Cost added during the period (a).............. $425,500 $145,000
Equivalent units of production (b)............. 402,500 405,000
Cost per equivalent unit (a) ÷ (b)............. $1.057 $0.358
3. See the next page.
4. Cost Reconciliation
Costs to be accounted for:
Cost of beginning work in process inventory
($45,500 + $25,000).......................................... $ 70,500
Costs added to production during the period
($425,500 + $145,000)....................................... 570,500
Total cost to be accounted for................................ $641,000
Costs accounted for as follows:
Cost of ending work in process inventory................ $ 77,740
Costs of units transferred out................................. 563,193
Total cost accounted for......................................... *$640,933
*Off $67 due to rounding.

Problem 6A-7 (continued)
3. Costs of Ending Work in Process Inventory and Units Transferred Out
n
Equivalent units of production................................................. 60,000 40,000
Cost per equivalent unit.......................................................... $1.057 $0.358
Cost of ending work in process inventory................................. $63,420 $14,320 $77,740
Cost in beginning work in process inventory............................ $45,500 $25,000 $70,500
Cost to complete the units in beginning work in process inventory:
Equivalent units of production required to complete the
beginning inventory........................................................ 12,500 35,000
Cost per equivalent unit..................................................... $1.057 $0.358
Cost to complete the units in beginning inventory................ $13,213 $12,530 25,743
Units started and completed this period.............................. 330,000 330,000
Cost per equivalent unit..................................................... $1.057 $0.358
Cost of units started and completed this period................... $348,810 $118,140 466,950
Cost of units transferred out................................................... $563,193

Case 6A-9 (60 minutes)
FIFO Method
1.
Transferred In Mate
Transferred in: 8,000 units × 0%.................................. 0
Materials: 8,000 units × 0%.........................................
Conversion: 8,000 units × (1 − 7/8)..............................
Units completed during the period (100,000 units started −
8,000 units in beginning inventory)................................ 92,000 92
Transferred in: 5,000 units x 100% complete 5,000
Materials: 5,000 units × 0% complete...........................
Conversion: 5,000 units × 2/5 complete........................
Equivalent units of production........................................... 97,000 92
Transferred In Mate
Cost added during the period (a)....................................... $81,480 $27
Equivalent units of production (b)...................................... 97,000 92
Cost per equivalent unit (a) ÷ (b)...................................... $0.84 $

Case 6A-9 (continued)
Transferred Con
In Materials
Equivalent units of production.......................... 5,000 0
Cost per equivalent unit................................... $0.84 $0.30
Cost of ending work in process inventory.......... $4,200 $0 $
Cost in beginning work in process inventory...... $8,820 $3,400 $1
Cost to complete units in beginning work in process inventory:
Equivalent units of production required to
complete the beginning inventory (see
above).................................................... 0 0
Cost per equivalent unit............................... $0.84 $0.30
Cost to complete units in beginning
inventory................................................. $0 $0 $
Units started and completed this period........ 92,000 92,000 9
Cost per equivalent unit............................... $0.84 $0.30
Cost of units started and completed this
period..................................................... $77,280 $27,600 $9
Cost of units transferred out............................
2. The effects of the cost-cutting will tend to show up more under the
FIFO method. The reason is that the FIFO method keeps the costs of
the current period separate from the costs of the prior period. Thus,
under the FIFO method, the company will be able to compare unit costs
of the current period to those of the prior period to see how effective
the cost-cutting program has been. Under the weighted-average
method, however, costs carried over from the prior period are averaged
in with costs of the current period, which will tend to mask somewhat
the effects of the cost-cutting effort.


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Chapter 6

Systems Design: Process Costing

Exercise 6-1 (20 minutes)

b. To record direct labour costs incurred:

c. To record applying manufacturing overhead:

f. To record Cost of Goods Sold:

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Total cost per equivalent Unit = $85.75 + $34.50 + $172.50 = $292.75

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Equivalent Units (EU)

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Total Cost Materials Conversion

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1. Equivalent Units of Production

Conversion: 55,000 units × 30% complete..... 16,500

Equivalent units of production.......................... 430,750 411,500

2. Cost per Equivalent Unit

Cost per equivalent unit, (a) ÷ (b)................ $1.31 $0.64*

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3. Cost of Ending Work in Process Inventory and Units Transferred Out

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Total Cost $827,000

Costs accounted for as follows:

*Difference of $643 due to rounding of the per unit costs

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1. Equivalent Units of Production

2. Cost per Equivalent Unit

3. Cost of Ending Work in Process Inventory and Units Transferred Out

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e. Finished Goods 950,000

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(a) 115,000 (a) 495,000

(b) 18,000 (b) 72,000

(d) 42,000 (d) 181,000

Manufacturing Overhead Finished Goods

(d) 42,000 (e) 950,000

Bal. 2,000 Bal. 80,000

Raw Materials Accounts Payable

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Accounts Receivable Cost of Goods Sold

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4. Units transferred to bottling 370,000 x ($1.30 + $0.20 +$0.50)

Work in Process—Bottling 740,000

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1. The revised computations follow:

Quantity Schedule and Equivalent Units of Transferred Conversio

Costs per equivalent unit Transferred Conversio

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Units transferred out:

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2. Computation of equivalent units in ending inventory:

3. Computation of equivalent units required to complete the beginning

4. Units transferred to the next department............. 4,400

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2. Cost per Equivalent Unit

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