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Process Costing Problems and Exercises

Process costing

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0% found this document useful (0 votes)
54 views

Process Costing Problems and Exercises

Process costing

Uploaded by

tenmamatsukase07
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Exercise 1 (a):

The Mexico Company manufactures a single product that goes through two
departments. The data relating to activity performed in first department
during the month of June is given below:

Required: Compute the equivalent units of production assuming the


company uses:

1. weighted average method


2. FIFO method

Exercise 1 (b):

The following data has been collected from three different situations. Units
transferred out are 100% complete with respect to all cost elements. Stages
of completion of beginning and ending inventories are applicable to all cost
elements.

1. Started in process: 26,000 units


Transferred out: 22,000 units
Work in process ending inventory: 1,600 units 1/2 completed and
2,400 units 1/4 completed

2. Work in process beginning inventory: 25,000 units, 2/5 completed


Started in process: 100,000 units
Transferred out: 105,000 units
Work in process ending inventory: 12,000 units 1/2 completed and
8,000 units 1/4 completed
3. Work in process beginning inventory: 18,000 units 1/3 completed and
12,000 units 1/2 completed
Started in process: 75,000 units
Transferred out: 90,000 units
Work in process ending inventory: 6,000 units 1/2 completed and
9,000 units 1/3 completed

Required: Compute equivalent production in each of the above situations


using:

1. weighted average costing method

2. FIFO costing method

Exercise 2:

Alfred, a US based company, produces chemical K-5 which has many


industrial uses. The chemical K-5 is processed through four different
departments. The production starts in the mixing department which is the
first processing department of the company. The selected data from mixing
department for the month of April is given below:

Required:

1. Compute the quantity of chemical K-5 finished and transferred to the


next department during April.
2. Prepare a quantity schedule for the mixing department assuming the
Alfred uses a weighted average method of process costing.
3. Prepare a quantity schedule for the mixing department assuming the
Alfred uses a FIFO method of process costing.
Exercise 3: Quantity schedule and equivalent units

The Southern Company produces a cleaning product known as Detergent-DK.


The product is processed through two departments – department X and
Department Y. The materials are added at the beginning of the
process in department X. The information relating to Detergent-DK
processed in department X during the month of August is given below:

 Work in process, August 1: 15,000 liters (55% complete)


 Started into processing during August: 240,000 liters
 Work in process, August 31: 10,000 liters (90% complete)

The percentages of completion of beginning and ending work in process


inventories given above are related to conversion cost only.

Required: Prepare a quantity schedule and compute equivalent units of


production for department X using:

1. weighted average method


2. FIFO method

1. Prepare a quantity schedule for the mixing department assuming the


Alfred uses a FIFO method of process costing.
Exercise 4: Cost per equivalent unit – weighted average and FIFO method
The Alpha Global Inc. produces a product known as Antacid-ZX – an over the
counter medicine used to neutralize stomach acidity. The processing of
Antacid-ZX is completed in three separate departments. The data belonging
to first department for the month of March is given below:

The stages of completion of beginning and ending work in process


inventories with respect to materials and processing were as follows:
Beginning work in process inventory:
Materials: 80%
Processing: 75%

Ending work in process inventory:


Materials: 60%
Processing: 20%

Required: Make a quantity schedule, compute the equivalent units of


production and determine the cost per equivalent unit assuming the Alpha
Global Inc. uses the following methods of accounting for units and costs:

Exercise 5: Equivalent units, cost per equivalent unit – weighted average


method

The Fedex Company produces a car care product known as Shine-9 which is
a high quality vehicle cleaning liquid. The processing of Shine-9 is completed
through three separate departments. The following data pertains to the
company’s first processing department:

The information about the cost in work in process beginning inventory and
the total cost added during the month of May is given below:

Work in process inventory on May 1:


 Materials: P28,300
 Conversion cost: P7,450

Cost added during May:

 Materials: P192,500
 Conversion cost: P107,250

Required:

1. Determine the missing figures in the above schedule


(Hint: Compute equivalent units of production for May for the first
department).
2. Compute cost per equivalent unit for May for the first department of
Fedex Company.

Exercise 6: cost reconciliation – weighted average method


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Note: In this exercise, we have used the data of Fedex Company from
exercise 5. If you have directly come to this exercise, we recommend you try
to solve exercise 5 first and then come back to this exercise to continue.

The Fedex Company uses a weighted average method to account for units
and costs. The following information belongs to the company’s first
processing department.

Quantity schedule and equivalent units – (taken from exercise 5):


Computation of cost per equivalent unit – (taken from exercise 5):

The cost per equivalent for the month of May for first department has been
computed below:
Required: Using above data, complete the following cost reconciliation of
the first processing department of Fedex Company:

Exercise 7: Quantity schedule, cost per equivalent units – FIFO method

The Hotex Company produces a chemical to be used in the production of


pesticides. The company is currently using weighted average method to
prepare production reports for all of its departments. The company’s CEO is
interested to know how converting from the weighted average method to
FIFO method would impact the preparation of quantity schedule,
determination of equivalent units and computation of cost per equivalent
unit.

The quantity schedule and the number of equivalent units determined using
weighted average method for July for the first department are given below:

Quantity schedule and equivalent units – weighted average method:


The selected cost data related to first department is given below:

Cost in work in process (WIP) inventory on July 1:

 Materials cost: P113,200


 Conversion cost: P29,800

Cost added by the first department during July:

 Materials cost: P770,000


 Conversion cost: P429,000

Required:

1. Prepare a quantity schedule and determine the equivalent units of


production using FIFO method.
2. Compute cost per equivalent unit for July for the first department using
FIFO method.
Exercise 8: Cost reconciliation – FIFO method

Note: In this exercise, we have used the data of Hotex Company from
exercise 7. If you have directly come to this exercise, we recommend you try
to solve exercise 7 first and then come back to this exercise to continue.

The Hotex Company presents you the following information for July for the
first processing department:

Quantity schedule and equivalent units – FIFO method – (taken from


exercise 7):

*Work done in July: 25% (= 100% – 75%) with respect to materials and 60%
(= 100% – 40%) with respect to conversion.

**Units started – Work in process ending inventory


70,000 – 10,000 = 60,000
Alternatively, this figure can be computed as follow:
Units transferred out – Work in process beginning inventory
75,000 – 15,000 = 60,000

Cost per equivalent unit – FIFO method – (taken from exercise 7):

Required: Using above data, complete the following cost reconciliation for
July for the first processing department of Hotex Company.
Exercise 9: Process costing journal entries

The Veeta Baking Company has a single product known as Veeta Bread. The
company uses a process costing system. The Veeta Bread is processed
through two departments – mixing department and baking department.

The flow of cost through mixing and baking departments for the month of
July has been shown by the following work in process T-accounts:
Required: Using the information given in above T-accounts, make journal
entries to show the flow of cost through mixing and baking departments for
the month of July.

Exercise 10 (a):

The Meezan Company has three processing departments. The costs incurred
in the second department during May were as follows:

Cost from first department: P32,640


Cost added by second department:
Materials: P86,830
Labor: P112,200
Manufacturing overhead: P117,150

24,000 units were received from first department during May. 14,000 units
were completed and transferred to finished goods store room and 10,000
units were still in process at the end of May. The units in work in process
ending inventory were 50% complete with respect to materials and 25%
complete with respect to labor and manufacturing overhead cost.

Required: Using above data, prepare a cost of production report for May for
the second department of Meezan Company.
Exercise 10 (b):

The Xcell Health Care Company uses process costing system. The costs
incurred in department 2 during the month of March are given below:

The quantity schedule of department 2 has provided the following


information:

 Units received from department 1: 2,500 units


 Units transferred to department 3: 2,000 units
 Units still in process on March 31: 500 units

The stages of completion of units in process with respect to cost incurred is


given below:

 50% of the units were 40% complete


 20% of the units were 30% complete
 30% of the units were 20% complete

There were no work in process inventories on March 1. There was no normal


or abnormal spoilage in Department 2 during march

Required: Prepare a cost of production report for Department 2 of Xcell


Health Care Company.

Exercise 11 (a) – normal loss in 1st department:

The Sunshine Company uses process costing system. During May, 5,250
units were put into process in first department. 3,500 units were transferred
to next department, 250 units were lost in process and 1,500 units were in
process at the end of the month.

For the month of May, the materials cost was P105,000, labor cost was
P79,540 and manufacturing overhead cost was P63,050.
The materials were added at the start of production process in first
department. All units in ending inventory were 90% complete as to labor and
manufacturing overhead costs. Any spoilage occurred during the month was
considered a normal loss.

Required: Prepare a cost of production report for May for the first
department of Sunshine Company.

Exercise 11 (b) – normal loss in second department:

The Horizon Inc. has three processing departments and uses a process
costing system. For November, the cost and production data related to
department 2 is given below:

The materials are added in the beginning of production process in


department 1. No materials are added in department 2.

Required: Prepare a cost of production report of department 2 of Horizon


Inc. for November.

Exercise 12: Cost of production report – abnormal loss

The Kim Corporation has three processing departments – department A,


department B and department C. During March, the department B received
120,000 units from department A at a unit cost of P3.54. Out of these
120,000 units, 100,000 units were transferred to department C; 18,000 units
were in process at the end of March (100% materials and 2/3 labor and
manufacturing overhead); 2,000 units were lost in process (50% complete as
to materials, labor and manufacturing overhead).
The cost added by department B during the the month of March was as
follows:

 Materials: P83,300
 Labor: P203,400
 Factory overhead: P113,000

The entire loss occurred in department B is considered abnormal which is to


be charged to factory overhead.

Required: Using the data given above, prepare a cost of production report
of department B of Kim corporation.

Exercise 13: Cost of production report – normal loss at the end of process

The Sky Corporation uses a process costing system in its two production
departments – department X and department Y. During October, department
Y received 5,000 units from department X at a cost of P100,000. The
materials and conversion costs incurred in department Y during the month of
October were as follows:

 Materials: P16,000
 Conversion costs: P72,000

In department Y, materials are added at the end of process after quality


control inspection.

During October, department Y completed and transferred 4,000 units to


finished goods storeroom. The 600 units were in process at the end of month
(2/3 complete as to conversion cost). All loss occurred in department Y was
considered as normal.

Required: Prepare a cost of production report of department Y

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