PROCESS COSTING

PROCESS COSTING - FIFO

Sabon Company manufactures soap in two departments in a continuous process. The following data is available for June 2017:
Department 1 Department 2
UNITS:
Beginning work in process 5,000 7,000
Stage of completion 65% 40%
Started in June 50,000
Transferred out ? 43,000
Ending work in process 10,000 9,000
Stage of completion 50%
COSTS:
Beginning work in process
Transferred in P 0 P 30,000
Added this department
Direct Materials 13,000 14,600
Conversion costs 19,475 20,960
Added this month
Direct Materials P 65,000 P 45,000
Conversion costs 147,750 111,750
All materials are added at the start of the process of each department while conversion costs are applied evenly during the process.
Compute the following for both departments:
1. Equivalent units of production for materials and conversion costs
2. Cost per equivalent unit
3. Cost of the units finished and transferred out
4. Cost of the units in process, end

PROCESS COSTING – AVERAGE

Fire drill Company manufactures fire extinguishers for establishments in two departments: Assembly and Filling Department. The following production and cost
data are available for the month of May 2017:
Assembly Filling
UNITS:
Beginning WIP, May 1 1,300 900
Complete as to materials 80% 0%
Complete as to conversion costs 75% 60%
Units started in May 4,800 ?
Units completed in May ? 4,500
Ending WIP, May 31 1,100 ?
Complete as to materials 40% 0%
Complete as to conversion costs 20% 40%
COSTS:
Beginning WIP
Transferred in 0 P 12,830
Materials P 9,800 0
Conversion 6,350 2,700
Added this month:
Transferred in 0 P ?
Materials P 35,352 9,900
Conversion 24,970 22,600
Compute the ff. for both departments:
1. Equivalent units of production for materials and conversion costs
2. Cost per equivalent unit
3. Cost of the units finished and transferred out
4. Cost of the units in process, end

NORMAL AND ABNORMAL SPOILAGE

Chester Manufacturing Company applies process costing in the manufacture of its product “CHEST-NUTS”. Manufacturing starts in Department 1 where
materials are all added at the start of the processing. The good units are then transferred to Department 2 where all the incremental materials needed for its
completion are added AFTER final inspection. IN Department 1, units are inspected at the end of processing while in Department 2, inspection takes place
when the units are 90% completed.
Department 1 uses FIFO costing while Department 2 uses weighted average costing.
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The production data for the month of July show the following:
Department 1 Department 2
UNITS:
Beginning WIP, July 1 8,000 4,000
Work done 1/5 4/5
Ending WIP, July 31 12,000 7,000
Work to be done 1/3 2/7
Started in process during July 60,000
Normal Spoilage 2,400 1,000
Abnormal Spoilage 600 500

COSTS:
Beginning WIP P 0 P 19,030
Transferred in 9,000 14,325
Materials 6,500 18,715
Conversion
Added this month:
Transferred in P 0 P ?
Materials 132,000 56,000
Conversion 205,920 85,500
Compute for both departments:
1. Equivalent units of production. 4. Cost of units in process, end
2. Units costs 5. Cost of abnormal spoiled units
3. Cost of units finished and transferred

MULTIPLE CHOICE EXERCISES

1. Red Corporation’s production starts in Department 1. The following data is available for April:
Units work in process, April 1 (50% complete) 40,000
Units started in April 240,000
Units work in process, April 30 (60% complete) 25,000
Materials are added at the beginning of the process in Department 1.
Using average cost method, what are the equivalent units of production for the month of April?
Materials Conversion costs
a. 255,000 255,000
b. 270,000 280,000
c. 280,000 270,000
d. 305,000 275,000

The ff. are the production data for the Assembly Department of Pink Manufacturing Company:
UNITS COST DATA
Work in process, May 1 8 WIP, May 1
Started in May 50 Materials P 49,336
Completed during May ? Conversion Costs 9,104
Work in process, May 31 12
STAGE OF COMPLETION Materials Conversion costs Cost Added in May
WIP, May 1 90% 40% Materials 322,000
WIP, May 31 60% 30% Conversion Costs 139,200
The Assembly department uses the average method of process costing.
2. What are the equivalent units for direct materials and conversion costs?
Direct Materials Conversion costs
a. 53.2 49.6
b. 50.0 50.2
c. 49.6 53.2
d. 53.2 50.0
3. What are the cost of the units transferred out and the units in the ending work in process?
Transferred out Ending WIP
a. P458,620 P61,020
b. P450,620 P61,020
c. P458,620 P60,000
d. P459,600 P65,020

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The data has been gathered from the records of Ramon Manufacturing Company for April 2017:
Units
Work in Process, April 1 (40% complete as to conversion costs) 5,000 units
Started in May 90,400 units
Work in process, April 30 (70% complete as to conversion costs) 4,000 units

Costs
Work in process, April 1 P 24,875
Materials cost incurred in April 433,920
Conversion costs incurred in April 115.250
The company uses the FIFO process costing method. Materials are added at the beginning of processing while conversion costs is evenly during the process:
4. What are the equivalent units of production?
Materials Conversion Costs
a. 90,400 92,200
b. 95,400 91,200
c. 86,400 89,400
d. 92,400 90,600
5. What is the cost of the units transferred out in April?
a. P551,345 c. P522,720
b. P547,595 d. P526,470
6. What is the cost of ending work in process?
a. P22,700 c. P19,200
b. P23,700 d. P22,000

Jimmy Company manufactures a highly sensitive smoke alarm and uses the FIFO method for process costing. The total manufacturing costs for the month of
June is P264,000 and 2,750 units are completed during the month.

The inventories at the beginning of June are:

Units in process (80% complete) 1,250 units P128,000
Units on hand (complete) 600 units P 76,800
The inventories at the end of June are:
Units in process (50% complete) 500 units
Units on hand (complete) 700 units

7. What is the equivalent unit of production?

a. 2,000 c. 2,200
b. 3,000 d. 1,750
8. What is the total cost of the units completed?
a. P92,400 c. P231,000
b. P79,200 d. P363,000
9. What is the total cost of units in process at the end?
a. P33,000 c. P32,000
b. P32,200 d. P66,000

Materials are added at the start of the process in the first department of Lerma Manufacturing Company. The following information is available for the month of
March 2017.
Work in process, March 1 (60% complete as to conversion costs) 30,000 units
Started in March 75,000 units
Transferred out next department 55,000 units
Work in process, March 31 (50% complete as to conversion costs) 35,000 units
Normal lost units ? units
Lost units are discovered at the end of the process.
10. Using average method, what is the equivalent unit of production for materials?
a. 105,000 c. 90,000
b. 72,500 d. 90,500
11. Assuming the FIFO method is used, what is the equivalent unit of production for conversion costs?
a. 69,500 c. 84,500
b. 75,500 d. 87,500

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Cards Company has the following production data for the month of April 2017:
Work in process, April 1 10,000 units
Started during April 40,000 units
Transferred out to finished goods ?
Work in process, April 30 15,000 units
Abnormal lost units 2,000 units
Materials are added at the beginning of the process. As to conversion costs, the beginning work in process was 70% completed and the work in process was
60% completed. Lost units are detected at the end of the process.
12. Using average method, what is the equivalent unit for April with respect to conversion costs?
a. 42,000 c. 44,000
b. 45,000 d. 46,000

The production data for Department 1 for May 2017 are as follows:
Physical Units Direct Material Conversion Costs
WIP, May 1 (25% complete as to conversion costs) 10,000 P 250,000 P 30,000
Started in May 74,000
Transferred out during May 61,000
Spoiled units 8,000
Costs added during May P 1,480,000 P 942,000
Unit costs P 20 P 12
Materials are added at the start of the process. Conversion costs are added evenly during the process. The company uses the FIFO method of costing.
Inspection occurs, when the production is 100% complete. Normal spoilage is 11% of good units transferred out during May.
13. What are the cost allocated to?
Transferred out Ending WIP Abnormal spoilage
a. P1,632,000 P685,280 P256,000
b. P2,216,720 P444,000 P41,280
c. P1,972,000 P658,720 P41,000
d. P2,228,000 P444,000 P41,280

The cost data and production data for King Company for the month of May are as follows:
Cost data: Production data:
WIP, May 1: Materials P 10,400 Work in process, May 1 (40% complete) 7,500 units
Conversion costs 13,800 Started in production this May 80,000 units
Cost added this month: Materials 120,000 Transferred out 72,500 units
Conversion costs 320,400 Work in process, May 31 (70% complete) 13,000 units
Normal lost units 1,100 units
Abnormal lost units ?
All materials are added at the start of the process and lost units are detected at the inspection point of 75% completion.
14. Under FIFO method, what are the equivalent units for materials and conversion costs?
Materials Conversion costs Materials Conversion costs
a. 80,000 80,100 c. 80,000 78,600
b. 78,000 78,600 d. 78,000 80,100
15. Under Average method, what are the equivalent units for materials and conversion costs?
Materials Conversion costs Materials Conversion costs
a. 87,500 83,100 c. 87,500 81,600
b. 85,500 83,100 d. 85,500 81,600
16. Using FIFO method, what are the cost assigned to units transferred out and units in ending work in process?
Transferred out Ending WIP Transferred out Ending WIP
a. P403,825 P56,725 c. P403,825 P55,900
b. P404,650 P55,900 d. P404,650 P55,725
17. Using Average method, what are the cost assigned to units transferred out and units in ending work in process?
Transferred out Ending WIP Transferred out Ending WIP
a. P403,825 P56,725 c. P403,825 P55,900
b. P404,650 P55,900 d. P404,650 P55,725
18. What is the cost of abnormal lost units?
FIFO Average FIFO Average
a. P4,050 P4,056 c. P2,715 P2,700
b. P4,950 P4,960 d. P4,050 P4,050
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