Assumptions: ABC Manufacturing Company manufactures thousands of Products A.
These components are assembled in the Assembly Department, upon completion the units
are completely transferred to the Testing Department. The process-costing system for
Product A has a single direct cost category (direct materials) and a single indirect-cost
category (conversion costs). Direct materials are added at the beginning of the process in
Assembly. Conversion costs are added evenly during Assembly.
Case 1: Process costing with zero beginning and zero ending work in process
inventory that is all units are started and fully completed by the end of the
accounting period.
Data for the Assembly Department for January 2001
Physical Units for January 2001
Work in Process, beginning inventory (January 1) 0 units
Started during January 400 units
Completed and transferred out during January 400 units
Work in Process, ending inventory (January 31) 0 units
Total Costs for January 2001
Direct materials costs added during January Br.32, 000
Conversion costs added during January 24,000
Total Assembly Department costs added during January 56,000
Case 2: Process Costing with zero beginning but some ending work in
process inventory
Data for the Assembly Department for February 2001
Physical Units for February 2001
Work in Process, beginning inventory (February 1) 0 units
Started during February 400 units
Completed and transferred out during February 175 units
Work in Process, ending inventory (February 28) 225 units
Total Costs for February 2001
Direct materials costs added during February Br.32, 000
Conversion costs added during February 18,600
Total Assembly Department costs added during February 50,600
In addition, the Assembly Dep artment estimates that the partially assembled units are on
averages 60% complete as to conversion costs.
Case 3: Process costing with some beginning and ending work in process
inventory.
Data for the Assembly Department for March 2001
Physical Units for March 2001
Work in Process, beginning inventory (March 1) 225 units
Direct Materials (100% complete)
Conversion costs (60% complete)
Started during March 275 units
Completed and transferred out during March 400 units
Work in Process, ending inventory (March 31) 100 units
Direct Materials (100% complete)
Conversion costs (50% complete)
Total Costs for March 2001
Work in process, beginning inventory
Direct materials (225 equivalent units * Br. 80/unit) Br. 18,000
Conversion costs (135 equivalent units * Br.60/unit) 8,100 Br. 26,100
Direct materials costs added during March 19,800
Conversion costs added during March 16,380
Total costs to account for Br.62, 280
