Chapter 4: Process Costing
Exercises
17-13 Equivalent units, zero beginning inventory. A&A Inc. is a manufacturer of digital
cameras. It has two departments: assembly and testing. In January 2018, the company incurred
$900,000 on direct materials and $957,600 on conversion costs, for a total manufacturing cost of
$1,857,600.
Required
1. Assume there was no beginning inventory of any kind on January 1, 2018. During
January, 12,000 cameras were placed into production and all 12,000 were fully
completed at the end of the month. What is the unit cost of an assembled camera in
January 2018?
2. Assume that during February, 12,000 cameras were placed into production. Further
assume the same total assembly costs for January are also incurred in February 2018, but
only 9,000 cameras are fully completed at the end of February. All direct materials have
been added to the remaining 3,000 cameras. However, on average, these remaining 3,000
cameras are only 50% complete as to conversion costs. (a) What are the equivalent units
for direct materials and conversion costs and their respective costs per equivalent unit for
February? (b) What is the unit cost of an assembled camera in February 2018?
3. Explain the difference in your answers to requirements 1 and 2.
17-14 Journal entries (continuation of Exercise 17-13).
Required
Prepare summary journal entries for the use of direct materials and incurrence of conversion
costs. Also prepare a journal entry to transfer out the cost of goods completed. Show the postings
to the Work-in-Process account.
17-15 Zero beginning inventory, materials introduced in middle of process. Roary
Chemicals has a mixing department and a refining department. Its process-costing system in the
mixing department has two direct materials cost categories (Chemical P and Chemical Q) and
one conversion costs pool. The following data pertain to the mixing department for July 2018:
Physical Units:
Work in process, July 1 0
Units started 50,000
Completed and transferred to
refining department 35,000
Costs:
Chemical P $250,000
Chemical Q 70,000
Conversion costs 135,000
Chemical P is introduced at the start of operations in the mixing department, and Chemical Q is
added when the product is three-quarters completed in the mixing department. Conversion costs
are added evenly during the process. The ending work in process in the mixing department is
two-thirds completed.
Required
1. Compute the equivalent units in the mixing department for July 2018 for each cost
category.
2. Compute (a) the cost of goods completed and transferred to the refining department
during July and (b) the cost of work in process as of July 31, 2018.
17-16 Weighted-average method, assigning costs. Bio Doc Corporation is a biotech company
that makes a cancer-treatment drug in a single processing department. Direct materials are added
at the start of the process. Conversion costs are added evenly during the process. Bio Doc uses
the weighted-average method of process costing. The following information for July 2018 is
available:
Equivalent Units
Physical Direct Conversion
Units Materials Costs
Work in process, July 1* 12,500 12,500 8,750
Started during July 50,000
Completed and transferred out during July 42,500 42,500 42,500
Work in process, July 31† 20,000 20,000 10,000
*Degree of completion: direct materials, 100%; conversion costs, 70%.
†Degree of completion: direct materials, 100%; conversion costs, 50%.
Total Costs for July 2018
Work in process, beginning
Direct materials $75,000
Conversion costs 87,500 $162,500
Direct materials added during July 325,000
Conversion costs added during July 463,750
Total costs to account for $951,250
Required
1. Calculate the cost per equivalent unit for direct materials and conversion costs.
2. Summarize total costs to account for, and assign total costs to units completed (and
transferred out) and to units in ending work in process.
17-17 FIFO method, assigning costs. Refer to the information in Exercise 17-16.
Required
Do Exercise 17-16 using the FIFO method. Note that you first need to calculate the equivalent
units of work done in the current period (for direct materials and conversion costs) to complete
beginning work in process, to start and complete new units, and to produce ending work in
process.
17-18 Standard-costing method, assigning costs. Refer to the information in Exercise 17-16.
Suppose Bio Doc determines standard costs of $6.60 per equivalent unit for direct materials and
$10.40 per equivalent unit for conversion costs for both beginning work in process and work
done in the current period.
Required
1. Do Exercise 17-16 using the standard-costing method. Note that you first need to
calculate the equivalent units of work done in the current period (for direct materials and
conversion costs) to complete beginning work in process, to start and complete new units,
and to produce ending work in process.
2. Compute the total direct materials and conversion costs variances for July 2018.
17-19 Weighted-average method, equivalent units and unit costs. Consider the following data
for the assembly division of a satellite manufacturer:
Physical Units Direct Conversion
(satellites) Materials Costs
Beginning work in process (May 1)* 8 $ 5,426,960 $ 1,001,440
Started in May 2018 55
Completed during May 2018 51
Ending work in process (May 31)† 12
Costs added during May 2018 $35,420,000 $15,312,000
* Degree of completion: direct materials, 90%; conversion costs, 40%.
† Degree of completion: direct materials, 60%; conversion costs, 30%.
The assembly division uses the weighted-average method of process costing.
Required
1. Compute equivalent units for direct materials and conversion costs. Show physical units
in the first column of your schedule.
2. Calculate cost per equivalent unit for direct materials and conversion costs.
17-20 Weighted-average method, assigning costs (continuation of Exercise 17-19).
Required
For the data in Exercise 17-19, summarize total costs to account for, and assign these costs to
units completed (and transferred out) and to units in ending work in process.
17-21 FIFO method, equivalent units and unit costs. Refer to the information in Exercise 17-
19. Suppose the assembly division uses the FIFO method of process costing instead of the
weighted-average method.
Required
1. Compute equivalent units for direct materials and conversion costs. Show physical units
in the first column of your schedule.
2. Calculate cost per equivalent unit for direct materials and conversion costs.
17-22 FIFO method, assigning costs (continuation of Exercise 17-21).
Required
For the data in Exercise 17-19, use the FIFO method to summarize total costs to account for, and
assign these costs to units completed and transferred out, and to units in ending work in process.
17-23 Standard-costing with beginning and ending work in process. Lawrence Company is a
manufacturer of contemporary door handles. The vice president of Design attends home shows
twice a year so the company can keep current with home trends. Because of its volume,
Lawrence uses process costing to account for production. Costs and output figures for August are
as follows:
Lawrence Company’s Process Costing
for the Month Ended August 31, 2017
Direct Conversion
Units
Materials Costs
Standard cost per unit $ 5.75 $ 12.25
Work in process, beginning inventory (Aug. 1) 15,000 $ 86,250 $ 55,125
Degree of completion of beginning work in
100% 30%
process
Started in August 100,000
Completed and transferred out 95,000
Work in process, ending inventory (Aug. 31) 20,000
Degree of completion of ending work in process 100% 80%
Total costs added during August $569,000 $1,307,240
Required
1. Compute equivalent units for direct materials and conversion costs. Show physical units
in the first column of your schedule.
2. Compute the total standard costs of handles transferred out in August and the total
standard costs of the August 31 inventory of work in process.
3. Compute the total August variances for direct materials and conversion costs.
4. Prepare summarized journal entries to record both the actual costs and standard costs for
direct materials and conversion costs, including the variances for both production costs.
17-24 Transferred-in costs, weighted-average method. Asaya Clothing Inc. is a manufacturer
of winter clothes. It has a knitting department and a finishing department. This exercise focuses
on the finishing department. Direct materials are added at the end of the process. Conversion
costs are added evenly during the process. Asaya uses the weighted-average method of process
costing. The information for June 2018 is shown below.
Physical Transferred-in Direct Conversion
Units (tonnes) Costs Materials Costs
Work in process, beginning
75 $ 75,000 $ 0 $30,000
inventory (June 1)
Degree of completion, beginning
100% 0% 60%
work in process
Transferred in during June 135
Completed and transferred out
150
during June
Work in process, ending
60
inventory (June 30)
Degree of completion, ending
100% 0% 75%
work in process
Total costs added during June $142,500 $37,500 $78,000
Required
1. Calculate equivalent units (tonnes) of transferred-in costs, direct materials, and
conversion costs.
2. Summarize total costs to account for, and calculate the cost per equivalent unit for
transferred-in costs, direct materials, and conversion costs.
3. Assign total costs to units completed (and transferred out) and to units in ending work in
process.
17-26 Weighted-average method, equivalent units and unit costs. Consider the following data
for the assembly division of Fenton Watches Inc.:
Physical Direct Conversion
Units Materials Costs
Beginning work in process (May 1)* 80 $ 493,360 $ 91,040
Started in May 2018 500
Completed during May 2018 460
Ending work in process (May 31)† 120
Costs added during May 2018 $3,220,000 $1,392,000
*
Degree of completion: direct materials, 90%; conversion costs, 50%.
†
Degree of completion: direct materials, 60%; conversion costs, 30%.
The assembly division uses the weighted-average method of process costing.
Required
Compute equivalent units for direct materials and conversion costs. Show physical units in the
first column of your schedule.
17-27 Weighted-average method, assigning costs (continuation of Exercise 17-26).
Required
For the data in Exercise 17-26, summarize total costs to account for, calculate cost per equivalent
unit for direct materials and conversion costs, and assign total costs to units completed (and
transferred out) and to units in ending work in process.
17-28 FIFO method, equivalent units. Refer to the information in Exercise 17-26. Suppose the
assembly division at Fenton Watches Inc. uses the FIFO method of process costing instead of the
weighted- average method.
Required
Compute equivalent units for direct materials and conversion costs. Show physical units in the
first column of your schedule.
17-29 FIFO method, assigning costs (continuation of Exercise 17-28).
Required
For the data in Exercise 17-26, use the FIFO method to summarize total costs to account for,
calculate cost per equivalent unit for direct materials and conversion costs, and assign total costs
to units completed (and transferred out) and to units in ending work in process.
