CHAPTER 4
Process Costing and Hybrid Product-Costing Systems ANSWERS TO REVIEW QUESTIONS 4-1
In a jobjob-or orde derr cos costing ting syste ystem m, costs osts are assi assign gned ed to batc batches hes or job job orde orderrs of production. Job-order costing is used by firms that produce relatively small numbers of dissimilar products. In a process-costing system, costs are averaged over a large number of product units. Process costing is used by firms that produce large numbers of nearly identical products.
4-2 4-2
Proc Proces esss costin costing g would would be an appro appropr pria iate te produ product ct-c -cos osti ting ng syst system em in the follo followi wing ng industries: petroleum, food processing, lumber, chemicals, textiles, and electronics. Each of these industries is involved in the production of very large numbers of highly similar products.
4-3 4-3
Proc Proces esss cost costin ing g coul could d be used used in the the foll follow owin ing g nonm nonman anuf ufac actu turi ring ng ente enterp rpri rise ses: s: processing of tests in a medical diagnostic laboratory, processing of tax returns by the Internal Revenue Service, and processing of loan applications in a bank.
4-4 4-4
Prod Produc uct-c t-cos osti ting ng sys syste tems ms are are used used for for the the follo followi wing ng pur purpo pose ses: s: (a) In financ financial ial accounti accounting: ng: Product Product costs costs are needed needed to value value invent inventory ory on the balance sheet and to compute the cost-of-goods-sold expense on the income statement. (b) (b) In mana manage geri rial al acco account untin ing: g: Prod Produc uctt cost costss are are need needed ed for for plan planni ning ng,, for for cost cost control, and to provide managers with data for decision making. (c) In report reporting ing to intere intereste sted d organi organiza zatio tions: ns: Produ Product ct cost cost inform informati ation on is used used to report on relationships between firms and various outside organizations. For exampl example, e, hospit hospitals als keep keep track track of the costs costs of medica medicall proced procedure uress that that are are reimbursed by insurance companies or by the federal government under the Medicare program.
4-5 4-5
An equi equiva vale lent nt unit unit is a meas measur uree of the amou amount nt of prod produc ucti tive ve effo effort rt appl applie ied d in the production process. In process costing, costs are assigned to equivalent units rather than to physical units.
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4-6 4-6
The The fol follo lowi wing ng four four step stepss are are used used in proc proces esss cos costi ting: ng: (a) Analysis Analysis of physical physical flow of units: All of the units units in the beginning and and ending inventories, those started during the period, and those transferred out to finished goods are accounted for. (b) Calculatio Calculation n of equivalent equivalent units: units: The equivalent equivalent units of activity activity are computed for direct material and for conversion. (c) Computatio Computation n of unit costs: costs: The costs per equivalent equivalent unit for direct material material and conversion are computed. (d) Analysis Analysis of total costs: The cost of the goods completed completed and transferred transferred out and the cost of the ending work-in-process inventory are determined.
4-7 4-7
(a) (a) Jour Journa nall entr entryy to ente enterr dire direct ct-m -mat ater eria iall cost costss into into Work Work-i -inn-Pr Proc oces esss Inve Invent ntor oryy account: Work Work-i -in-P n-Pro roce cess ss Inv Inven ento tory ry:: Depa Depart rtme ment nt A... A...... ...... ...... ...... ....... ...... Raw-Material Inventory..........................................
XXX XXX XXX
(b) Journal Journal entry to record transfer transfer of goods from the first to the second department department in the production sequence: Work Work-i -in-P n-Pro roce cess ss Inve Invent ntor ory: y: Depa Depart rtme ment nt B..... B........ ...... ...... ....... ...... .. Work-in-Process Inventory: Department A..........
XXX XXX XXX
4-8 4-8
Tran Transf sfer erre red-i d-in n costs costs are the cost costss assign assigned ed to partia partiall llyy comple complete ted d prod produc ucts ts that that have have been been comple completed ted in one produc productio tion n depart departmen mentt and transf transfer erred red from from that that production department into the next department.
4-9 4-9
The The $182 $182,0 ,000 00 of tran transf sfer erre redd-in in cost costss were were incu incurr rred ed prio priorr to Janu Januar aryy 1 and and in the the mixing department. The costs must have been incurred prior to January 1, because they are included in the cost of the beginning work-in-process inventory on that date. Moreover, these costs must have been incurred in the mixing department, because they have been transferred into the cooking department.
4-10 4-10
The The name name ''we ''weig ight hted ed-a -ave vera rage ge meth method od'''' come comess from from the the fact fact that that the the cost cost per per equivalent unit computed under this method is a weighted average of costs incurred during the current period and costs incurred during prior periods.
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4-11 4-11
The The diff differ eren ence ce betwe between en norma normall and and actu actual al costi costing ng lies in the calcu calcula lati tion on of the the manufa manufactu cturin ring-o g-over verhea head d cost cost of the curre current nt period period.. Under Under actual actual costin costing, g, the manufa manufactu cturin ring-o g-over verhea head d cost cost of the curren currentt period period is the actual actual overhe overhead ad cost cost incurred during the period. Under normal costing, the current-period manufacturing overhead is computed as the product of the predetermined overhead rate and the actual level of the cost driver used to apply manufacturing overhead.
4-12 4-12
If manu manufa fact ctur urin ing g over overhe head ad were were applie applied d acco accord rdin ing g to some activ activit ityy base base (or cost cost driver) other than direct labor, then direct-labor costs and manufacturing-overhead costs costs would would be accoun accounted ted for separa separatel telyy instea instead d of being being combin combined ed into into one account called "conversion costs." Thus, instead of two columns for direct-material and conversion costs, there would be three columns: direct material, direct labor, and manufacturing overhead.
4-13 4-13
Opera Operatio tion n costing costing is a hybrid hybrid produ productct-cos costin ting g system system that is used used when conver conversio sion n activi activitie tiess are very very simil similar ar across across produc productt lines, lines, but the direct direct materi materials als differ differ significantly. This is often the case in batch manufacturing operations. Conversion costs are accumulated by department, and process-costing methods are used to assign these costs to products. In contrast, direct-material costs are accumulated by job order or by batch, and job-order job-order costing is used to assign direct-material direct-material costs to products.
4-14 4-14
The The depa depart rtme menta ntall prod produc ucti tion on repo report rt is the key key docu docume ment nt in a proc proces esss-co cost stin ing g system rather than the job-cost sheet used in job-order costing. The departmental production report shows the analysis of the physical flow of units, the calculation of equivalent units, the computation of the cost per equivalent unit, and the analysis of the total costs incurred in the production department. The report shows the cost of the ending work-in-process inventory as well as the cost of the goods completed and transferred out of the department.
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SOLUTIONS TO EXERCISES EXERCISE 4-15 (10 MINUTES) The general formula for all three cases is the following: Work-in-process, beginning
+
Units started during month
–
Units completed during month
=
Work-in-process, ending
Using this formula, the missing amounts are: 1.
9,000 pounds
2.
12,500 yards
3.
72,000 liters
EXERCISE 4-16 (20 MINUTES) CALCULATION OF EQUIVALENT UNITS: HEALTHY LIFE STYLES, INC. Weighted-Average Method Percentage of Percentage Completion of with Completion Respect to with Equivalent Units Physical Direct Respect to Direct Units Material Conversion Mate aterial ial Conve onverrsion sion Work in process, January 1. . . . 30,000 70% 50% Units st started du during th the ye year. . 140,000 Total un units to to account fo for... ....... ...... 170,000 Unit completed and transferred out during the year......... ... Work in process, December 31 Total units accounted for...... .. Total equivalent units..............
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145,000 25,000 170,000
100% 75%
100% 20%
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145,000 18,750 ______ 163,750
145,000 5,000 _______ 150,000
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EXERCISE 4-17 (15 MINUTES) CALCULATION OF EQUIVALENT EQUIVALENT UNITS: PETROTECH COMPANY - AMARILLO PLANT Weighted-Average Method Percentage of Completion with Equivalent Units Physical Respect to Direct Units Conversion Material Conversion Work in process, July 1.......................... 1,900,000 30% Unit Unitss star starte ted d duri during ng July July.. .... .... .... .... .... .... .... .... .... .... .... .. 750, 750,00 0000 Tota Totall unit unitss to acco accoun untt for. for... ..... ..... .... .... ..... ...... ...... ..... .. 2,65 2,650, 0,00 0000 Units completed and transferred out during July................................... Work in process, July 31........................ Total un units ac accounted fo for....................... Total eq equivalent un units.............................
2,400,000 250,000 2,650,000
100% 70%
2,400,000 250,000 ________ 2,650,000
2,400,000 175,000 ________ 2,575,000
EXERCISE 4-18 (15 MINUTES) 1.
5,50 5,5000 equ equiv ival alen entt uni units ts (ref (refer er to (a) (a) in in the the foll follow owin ing g tab table le))
2.
4,14 4,1400 equ equiv ival alen entt uni units ts (ref (refer er to (b) (b) in in the the foll follow owin ing g tab table le))
CALCULATION OF EQUIVALENT UNITS: ANDROMEDA GLASS COMPANY Weighted-Average Method Percentage of Equivalent Units Completion with Physical Respect to Direct Units Conversion Material Conversion Work in process, August 1...... 2,000 60% Units st started du during Au August.... 3,500 Total un units to to ac account fo for........ 5,500 Units completed and transferred out during August............ Work in process, August 31.... Total units accounted for...... .. Total equivalent units.............. McGraw-Hill/Irwin Inc. Managerial Accounting, 8/e
3,800 1,700 5,500
100% 20%
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3,800 1,700 _____ (1) 5,500
3,800 340 ____ (2) 4,140
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EXERCISE 4-19 (30 MINUTES) All three of these companies manufacture large amounts of relatively homogeneous products (i.e., lumber and paper). Therefore, process costing is an appropriate productcosting system. EXERCISE 4-20 (15 MINUTES) CALCULATION OF COST PER EQUIVALENT UNIT: DULUTH GLASS COMPANY Weighted-Average Method Direct Material Conversion Total Work in process, February 1.................. $ 43,200 $ 40,300 $ 83,500 Costs incurred during February............ 135,000 190,000 325,000 Total costs to account for...................... $178,200 $230,300 $408,500 Equivalent units...................................... 16,500 47,000 Costs per equivalent unit....................... $10.80* $4.90† $15.70 *$10.80 = $178,200 ÷ 16,500 †
$4.90 = $230,300 ÷ 47,000
EXERCISE 4-21 (15 MINUTES) CALCULATION OF COST PER EQUIVALENT UNIT: MONTANA LUMBER COMPANY Weighted-Average Method Direct Material Conversion Total Work in process, June 1............................ $ 74,900 $167,000 $ 241,900 Costs incurred during June...................... 380,700 625,000 1,005,700 Total costs to account for......................... $455,600 $792,000 $1,247,600 Equivalent units......................................... 6,700 1,600 Costs per equivalent unit.......................... $68* $495† $563 *$68 = $455,600 ÷ 6,700 † $495 = $792,000 ÷ 1,600
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EXERCISE 4-22 (25 MINUTES) TUSCALOOSA PAPERBOARD COMPANY Weighted-Average Method Direct Material Conversion Work in process, March 1........................ $ 10,900 $ 28,950 Costs incurred during March.................. 112,700 160,200 Total costs to account for........................ $123,600 $189,150 Equivalent units........................................ 103,000 97,000 Costs per equivalent unit......................... $1.20 $1.95
Total $ 39,850 272,900 $312,750 $3.15
1. Cost of goods completed and transferred out during March:
numberofunits toalcostper × transfer dout equivalentunit 2.
89,000
$3.15
$280,350
............................................................
Cost remaining in March 31 work in process: Direct material (14,000* $1.20). Conversion (8,000* $1.95)........ Total............................................... Total costs accounted for.................
$
16,800 15,600 32,400 $312,750
*Equivalent units in March 31 work in process:
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Direct Material 103,000 © 2009
Conversion 97,000
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Units completed and transferred out............................... Equivalent units in ending work in process....................
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(89,000) 14,000
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(89,000) 8,000
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EXERCISE 4-23 (25 MINUTES) RALEIGH TEXTILES COMPANY Weighted-Average Method Direct Material Conversion Work in process, November 1................... $ 85,750 $ 16,900 Costs incurred during November............. 158,000 267,300 Total costs to account for......................... $243,750 $284,200 Equivalent units......................................... 62,500 49,000 Costs per equivalent unit.......................... $3.90 $5.80 1.
$9.70
Cost of goods completed and transferred out during November:
numberofunits toalcostper × transfer dout equivalentunit 2.
Total $ 102,650 425,300 $527,950
47,000
$9.70
$455,900
..........................................................
Cost remaining in November 30 work in process: $60,450 11,600
Direct material (15,500* $3.90) Conversion (2,000* $5.80)....... Total.............................................. Total costs accounted for................
72,050 $527,950
*Equivalent units in November 30 work in process:
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Direct Material 62,500 © 2009
Conversion 49,000
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Units completed and transferred out................................. Equivalent units in ending work in process......................
3.
(47,000) 15,500
(47,000) 2,000
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Exercise 4-24 (45 minutes) 1. Diagram of production process: Work-in-Process Inventory: Preparation Department Batch P25 Batch S33
Accumulated by department
Conversion costs: Direct-labor Manufacturing overhead Work-in-Process Inventory: Finishing Department Batch P25
Accumulated by batch
Batch S33
Directmaterial costs
Work-in-Process Inventory: Packaging Department Batch P25
Finished-Goods Inventory
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EXERCISE 4-24 (CONTINUED) 2. The product cost for each basketball is computed as follows: Professional Direct material:.................................................................... Batch P25 ($42,000 ÷ 2,000)........................................... Batch S33 ($45,000 ÷ 4,000)........................................... Conversion: Preparation Department............................... Conversion: Finishing Department................................... *Conversion: Packaging Department................................ Total product cost..............................................................
$21.00 -07.50 6.00 .50 $35.00
Scholastic -0$11.25 7.50 6.00 -0$24.75
*The two production departments each worked on a total of 6,000 balls, but the Packaging Department handled only the 2,000 professional balls. 3.
Journal entries: Work-in-Process Inventory: Preparation Department.......... Raw-Material Inventory..................................................
39,500* 39,500
*$39,500 = $42,000 of direct material for batch P25 – $2,500 of packaging material Work-in-Process Inventory: Preparation Department.......... Raw-Material Inventory..................................................
45,000* 45,000
*Direct-material cost for batch S33. Work-in-Process Inventory: Preparation Department.......... Applied Conversion Costs............................................ *$45,000 = 6,000 units
45,000* 45,000
$7.50 per unit
Work-in-Process Inventory: Finishing Department.............. Work-in-Process Inventory: Preparation Department
129,500* 129,500
*$129,500 = $39,500 + $45,000 + $45,000
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EXERCISE 4-24 (CONTINUED) Work-in-Process Inventory: Finishing Department.............. Applied Conversion Costs............................................ *$36,000 = 6,000 units
36,000* 36,000
$6.00 per unit
Work-in-Process Inventory: Packaging Department............ Finished-Goods Inventory...................................................... Work-in-Process Inventory: Finishing Department.....
66,500* 99,000† 165,500
*$66,500 = $39,500 + (2,000 $7.50) + (2,000 $6.00). These are the costs accumulated for batch P25 only. †
$99,000 = $45,000 + (4,000 $7.50) + (4,000 $6.00). These are the costs accumulated for batch S33 only. Work-in-Process Inventory: Packaging Department............ Raw-Material Inventory.................................................. Applied Conversion Costs............................................
3,500 2,500* 1,000 †
*Cost of packaging material for batch P25. †
$1,000 = 2,000 units
$.50 per unit
Finished-Goods Inventory...................................................... Work-in-Process Inventory: Packaging Department...
70,000* 70,000
*$70,000 = $66,500 + $3,500
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SOLUTIONS TO PROBLEMS PROBLEM 4-25 (45 MINUTES) 1.
2.
Physical flow of units: Work in process, June 1........................................................................... Units started during June......................................................................... Total units to account for..........................................................................
Physical Units 40,000 190,000 230,000
Units completed and transferred out during June.................................. Work in process, June 30......................................................................... Total units accounted for..........................................................................
180,000 50,000 230,000
Equivalent units:
Work in process, June 1........... Units started during June......... Total units to account for......... Units completed and transferred out during June.................... Work in process, June 30......... Total units accounted for......... Total equivalent units............... 3.
Physical Units 40,000 190,000 230,000
Percentage of Completion with Respect to Conversion 38%
180,000 50,000 230,000
100% 55%
Equivalent Units Direct Material Conversion
180,000 50,000
180,000 27,500
230,000
207,500
Costs per equivalent unit:
Work in process, June 1................ Costs incurred during June.......... Total costs to account for............. Equivalent units............................. Costs per equivalent unit..............
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Direct Material $110,500 430,000 $540,500 230,000 $2.35
Conversion $ 22,375 320,000 $342,375 207,500 $1.65
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Total $132,875 750,000 $882,875 $4.00
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PROBLEM 4-25 (CONTINUED) 4.
Cost of goods completed and transferred out during June:
numberofunits toalcostper × transfer dout equivalentunit
180,000
$4.00
$720,000
50,000
$2.35
$117,500
..........................................................
Cost remaining in June 30 work-in-process inventory: Direct material:
numberof costper e quivalent equivalent × unitsof unitof direct material direct material
...........................................................
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Conversion:
numberof costper e quivalent equivalent × unitsof unitof conversion conversion
27,500
$1.65
45,375
....................................................................
Total cost of June 30 work in process........................................................
$162,875
Check: Cost of goods completed and transferred out.............................. Cost of June 30 work-in-process inventory................................... Total costs accounted for...............................................................
$720,000 162,875 $882,875
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PROBLEM 4-26 (45 MINUTES) 1.
2.
Physical flow of units:
Work in process, April 1............................................................................ Units started during April.......................................................................... Total units to account for..........................................................................
Physical Units 10,000 100,000 110,000
Units completed and transferred out during April.................................. Work in process, April 30.......................................................................... Total units accounted for..............................................................................
80,000 30,000 110,000
Equivalent units:
Physical Units Work in process, April 1........... 10,000 Units started during April......... 100,000 Total units to account for......... 110,000 Units completed and transferred out during April. 80,000 Work in process, April 30 30,000 Total units accounted for......... 110,000 Total equivalent units............... 3.
Percentage of Completion with Respect to Conversion 20%
Equivalent Units Direct Material Conversion
100% 33 1/3%
80,000 30,000 ______ 110,000
80,000 10,000 _____ 90,000
Cost per equivalent unit: Direct Material Work in process, April 1.......................... $ 22,000 Costs incurred during April..................... 198,000 ................................................................... Total costs to account for....................... $220,000 Equivalent units....................................... 110,000 Costs per equivalent unit........................ $2.00*
Conversion Total $ 4,500 $ 26,500 158,400 356,400 $162,900 90,000 $1.81†
$382,900 $3.81
*$2.00 = $220,000 ÷ 110,000 † $1.81 = $162,900 ÷ 90,000 McGraw-Hill/Irwin Inc. Managerial Accounting, 8/e
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PROBLEM 4-26 (CONTINUED) 4.
Cost of goods completed and transferred out during April:
numberofunits toalcostper × t ransfer dout equivalentunit
80,000
$3.81
$304,800
30,000
$2.00
$60,000
..........................................................
Cost remaining in April 30 work-in-process inventory: Direct material:
numberof costper equivalent × equivalent unitsof unitof directmaterial directmaterial
............................................................
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numberof costper
10,000
$1.81
18,100
equivalent equivalent
×
..................................................................
unitsof unitof
conversion conversion 5.
Total cost of April 30 work-in-process...................................................
$78,100
Check: Cost of goods completed and transferred out........................ Cost of April 30 work-in-process inventory............................ Total costs accounted for.........................................................
$304,800 78,100 $382,900
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Problem 4-27 (50 minutes) 1.
2.
Physical flow of units:
Work in process, 1/1/x4........................................................................... Units started during 20x4........................................................................ Total units to account for........................................................................
Physical Units 210,000 1,100,000 1,310,000
Units completed and transferred out during 20x4................................ Work in process, 12/31/x4....................................................................... Total units accounted for........................................................................
1,000,000 310,000 1,310,000
Equivalent units:
Work in process, 1/1/x4............... Units started during 20x4............ Total units to account for............ Units completed and transferred out during 20x4....................... Work in process, 12/31/x4........... Total units accounted for............ Total equivalent units..................
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Percentage of Completion with Physical Respect to Units Conversion 210,000 83% 1,100,000 1,310,000 1,000,000 310,000 1,310,000
100% 48%
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Equivalent Units Direct Material Conversion
1,000,000 310,000 ________ 1,310,000
1,000,000 148,800 ________ 1,148,800
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PROBLEM 4-27 (CONTINUED) 3.
Costs per equivalent unit:
Work in process, 1/1/x4.................................. Costs incurred during 20x4........................... Total costs to account for.............................. Equivalent units.............................................. Costs per equivalent unit...............................
Direct Material Conversion Total a $ 300,000 $ 620,800 $ 920,800 1,403,000 3,400,000b 4,803,000 $1,703,000 $4,020,800 $5,723,800 1,310,000 1,148,800 c $1.30 $3.50d $4.80e
a
= = = = =
direct labor + overhead direct labor + (100% direct labor) 200% direct labor 200% $310,400 $620,800
b
= = =
200% direct labor 200% $1,700,000 $3,400,000
Conversion cost
Conversion cost
c
$1.30 = $1,703,000 ÷ 1,310,000
d
$3.50 = $4,020,800 ÷ 1,148,800
e
$4.80 = $1.30 + $3.50
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PROBLEM 4-27 (CONTINUED) 4.
Cost of ending inventories: Cost of goods completed and transferred out:
numberofunits toalcostper × t ransfer dout equivalentunit
1,000,000
$4.8 0
$4,800,000
310,000
$1.30
$403,000
..........................................................
Cost remaining in 12/31/x4 work-in-process inventory: Direct material:
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Conversion:
numberof costper
148,800
$3.50
520,800
equivalent equivalent
×
unitsof unitof
conversion conversion Total cost of 12/31/x4 work in process......................................................
$923,800
Check: Cost of goods completed and transferred out............................ Cost of 12/31/x4 work-in-process inventory............................... Total costs accounted for............................................................
$4,800,000 923,800 $5,723,800
The cost of the ending work-in-process inventory is $923,800. Ending finished-goods inventory: Of the 1,000,000 units completed during 20x4, 250,000 units remain in finished-goods inventory on December 31, 20x4. Therefore: $4,800,000
(250,000 ÷ 1,000,000) = $1,200,000*
The cost of the ending finished-goods inventory is $1,200,000. *Also, $1,200,000 = 250,000
$4.80 per unit
PROBLEM 4-28 (40 MINUTES) 1.
Equivalent units: Percentage of Completion with
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Work in process, August 1.......... Units started during August....... Total units to account for............ Units completed and transferred out during August................... Work in process, August 31........ Total units accounted for............ Total equivalent units.................. 2.
Physical Units 40,000 80,000 120,000
Respect to Conversion 80%
100,000 20,000 120,000
100% 30%
Direct Material
100,000 20,000 ______ 120,000
Conversion
100,000 6,000 ______ 106,000
Costs per equivalent unit: Direct Material Total costs to account for Equivalent units
$138,000 120,000
Costs per equivalent unit
$1.15
Conversion
Total
$1,089,680 106,000
$10.28
$11.43*
*$11.43 = $1.15 + $10.28 3.
Cost of goods completed and transferred out during August:
numberofunits toalcostper × t ransfer dout equivalentunit McGraw-Hill/Irwin Inc. 4-24
100,000
$11.43
$1,143,000
.......................................................
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PROBLEM 4-28 (CONTINUED) 4.
Cost remaining in August 31 work-in-process inventory: Direct material:
numberof costper equivalent × equivalent unitsof unitof directmaterial directmaterial
20,000
$1.15
$23,000
...........................................................
Conversion:
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numberof costper
6,000
$10.28
61,680
equivalent equivalent
×
................................................................
unitsof unitof c onversion conversion
5.
Total cost of August 31 work in process....................................................
$ 84,680
Check: Cost of goods completed and transferred out.............................. Cost of August 31 work-in-process inventory.............................. Total costs accounted for...............................................................
$1,143,000 84,680 $1,227,680
Journal entry: Finished-Goods Inventory................................................ Work-in-Process Inventory.....................................
McGraw-Hill/Irwin Inc. 4-26
© 2009
1,143,000 1,143,000
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PROBLEM 4-29 (40 MINUTES) 1.
a. Equivalents units:
Work in process, June 1........... Units started during June........ Total units to account for......... Units completed and transferred out during June. Work in process, June 30......... Total units accounted for......... Total equivalent units...............
Physical Units 30,000 34,000 64,000 40,000 24,000 64,000
Percentage of Completion with Respect to Conversion 35%
100% 75%
Equivalent Units Direct Material Conversion
40,000 24,000 _____ 64,000
40,000 18,000 _____ 58,000
b. Unit costs: Direct Material Total costs to account for Equivalent units
$348,800 64,000
Conversion $2,844,900 58,000
Costs per equivalent unit
$5.45
$49.05
Total
$54.50*
*$54.50 = $5.45 + $49.05
McGraw-Hill/Irwin Inc. Managerial Accounting, 8/e
© 2009
The McGraw-Hill Companies,
4- 27
PROBLEM 4-29 (CONTINUED) c.
Cost of goods completed and transferred out during June:
numberofunits toalcostper × t ransfer dout equivalentunit
40,000
$54.50
$2,180,000
$5.45
$130,800
Cost remaining in June 30 work-in-process inventory: Direct material:
number of costper equivalent equivalent
24,000
× unitsof unitof directmaterial directmaterial Conversion: McGraw-Hill/Irwin Inc. 4-28
© 2009
The McGraw-Hill Companies,
Solutions Manual
numberof costper equivalent × equivalent unitsof unitof conversion conversion
...............................18,000
$49.05
Total cost of June 30 work in process.................................................. Check: Cost of goods completed and transferred out............................ Cost of June 30 work-in-process inventory .............................. Total costs accounted for............................................................. 2.
882,900
$1,013,700 $2,180,000 1,013,700 $3,193,700
Journal entry: Finished-Goods Inventory............................................... 2,180,000 1,900,500 Work-in-Process Inventory.................................................................
McGraw-Hill/Irwin Inc. Managerial Accounting, 8/e
© 2009
2,180,000
The McGraw-Hill Companies,
4- 29
PROBLEM 4-30 (35 MINUTES) 1.
Direct material cost was $1,390,000: JR1163................................ JY1065................................ DC0766............................... Total..............................
$ 225,000 710,000 455,000 $1,390,000
Texarkana Corporation’s total direct-labor payroll amounted to $134,274 for 6,394 hours of work ($134,274 ÷ $21 per hour). Thus, conversion cost was $575,460: Direct labor……………………………….…….. $134,274 Overhead applied (6,394 hours x $69)…….. 441,186 Total………………………………………….. $575,460 2.
Goods completed during April cost $2,002,000 (26,000 units x $77) as the following calculations show:
Physical Units
Percentage Of Completion Equivalent Units With Respect to Direct Conversion Material Conversion
Work in process, April 1………………. Units started during April…………….. Total units to account for……………..
3,000 27,000 30,000
80%
Units completed and transferred out during April…………………….. Work in process, April 30…………….. Total units accounted for……………... Total equivalent units…………………..
26,000 4,000 30,000
100% 45%
McGraw-Hill/Irwin Inc. 4-30
© 2009
26,000 4,000
26,000 1,800
30,000
27,800
The McGraw-Hill Companies,
Solutions Manual
PROBLEM 4-30 (CONTINUED)
Work in process, April 1…………………… Costs incurred during April………………. Total costs to account for…………………. Equivalent units……………………………... Cost per equivalent unit……………………
Direct Material
Conversion
Total
$ 230,000 1,390,000 $1,620,000 30,000 $54a
$ 63,940 575,460 $639,400 27,800 $23b
$ 293,940 1,965,460 $2,259,400 $77c
a
$1,620,000 ÷ 30,000 = $54 $639,400 ÷ 27,800 = $23 c $54 + $23 = $77 b
3.
The cost of the ending work-in-process inventory is $257,400: Direct material (4,000 x $54)…….. Conversion cost (1,800 x $23)….. Total…………………………….
4.
5.
$216,000 41,400 $257,400
(a)
No material would be added during May. All material is introduced at the start of the manufacturing process, and these units were begun in April.
(b)
Since the work-in-process inventory is 45% complete at the end of April, 55% of the conversion would be done in May.
Given that the ending work-in-process inventory is at the 45% stage of completion, these units would not have reached the 75% point in April where TH55 is added. Therefore, there would be zero equivalent units with respect to part TH55 in the ending work-in-process inventory.
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PROBLEM 4-31 (50 MINUTES) The missing amounts are shown below. A completed production report follows. Work in process, October 1 (in units).................................................................. Units completed and transferred out during October......................................... Total equivalent units: conversion....................................................................... Work in process, October 1: conversion............................................................. Costs incurred during October: direct material.................................................. Cost per equivalent unit: conversion................................................................... Cost of goods completed and transferred out during October.......................... Cost remaining in ending work-in-process inventory: direct material..............
10,000 75,000 78,500 $
30,225 600,000 11.85 1,556,250 44,500
PRODUCTION REPORT: FANTASIA FLOUR MILLING COMPANY Weighted-Average Method Percentage of Completion with Equivalent Units Physical Respect to Direct Units Conversion Material Conversion Work in process, October 1.......... 10,000 15% Units started during October........ 70,000 Total units to account for.............. 80,000 Units completed and transferred out during October.............. Work in process, October 31........ Total units accounted for.............. Total equivalent units....................
McGraw-Hill/Irwin Inc. 4-32
75,000 5,000 80,000
100% 70%
© 2009
75,000 5,000 _____ 80,000
75,000 3,500 _____ 78,500
The McGraw-Hill Companies,
Solutions Manual
PROBLEM 4-31 (CONTINUED)
Work in process, October 1.......... Costs incurred during October..... Total costs to account for............. Equivalent units............................. Costs per equivalent unit..............
Direct Material $112,000 600,000 $712,000 80,000 $8.90*
Conversion $ 30,225 900,000 $930,225 78,500 $11.85†
Total $ 142,225 1,500,000 $1,642,225 $20.75**
*$8.90 = $712,000 ÷ 80,000 † $11.85 = $930,225 ÷ 78,500 **$20.75 = $8.90 + $11.85
McGraw-Hill/Irwin Inc. Managerial Accounting, 8/e
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4- 33
PROBLEM 4-31 (CONTINUED) Cost of goods completed and transferred out during October:
numberofunits toalcostper × t ransfer dout equivalentunit
.................................................................. 75,000
$20.75
$1,556,250
$8.90
$44,500
Cost remaining in October 31 work-in-process inventory: Direct material:
numberof costper equivalent × equivalent unitsof unitof d irectmaterial directmaterial
....................................................................
5,000
Conversion: McGraw-Hill/Irwin Inc. 4-34
© 2009
The McGraw-Hill Companies,
Solutions Manual
numberof costper equivalent × equivalent unitsof unitof c onversion conversion
..........................................................................
$11.85
41,475
Total cost of October 31 work-in-process........................................................
$85,975
Check: Cost of goods completed and transferred out...... Cost of October 31 work-in-process inventory..... Total costs accounted for.......................................
McGraw-Hill/Irwin Inc. Managerial Accounting, 8/e
3,500
$1,556,250 85,975 $1,642,225
© 2009
The McGraw-Hill Companies,
4- 35
PROBLEM 4-32 (30 MINUTES) 1.
The ending work-in-process inventory consisted of 400 units (200 + 800 – 600).
2.
The cost of goods completed during June totaled $57,000 (600 units x $95): Percentage Of Completion Equivalent Units With __________________ Physical Respect to Direct Units Conversion Material Conversion ________ __________ ______ __________ Work in process, June 1………………. 200 25% Units started during June…………….. 800 Total units to account for……………... 1,000 Units completed and transferred during June………………………….. Work in process, June 30……………... Total units accounted for……………… Total equivalent units…………………..
Work in process, June 1…………………… Costs incurred during June………………. Total costs to account for…………………. Equivalent units……………………………... Cost per equivalent unit…………………….
600 400 1,000
100% 75%
Direct Material Conversion _______ __________ $12,000 $ 6,000 43,000 30,000 $55,000 $36,000 1,000 900 a $55 $40b
600 400
600 300
1,000
900
Total ______ $18,000 73,000 $91,000 $95c
a
$55,000 ÷ 1,000 = $55 $36,000 ÷ 900 = $40 c $55 + $40 = $95 b
Finished-Goods Inventory…………………………… 57,000 Work-in-Process Inventory…………………. 3.
57,000
The cost of the June 30 work-in-process inventory is $34,000: Direct material (400 x $55)……... $22,000 Conversion cost (300 x $40)…….. 12,000 Total……………………………… $34,000
McGraw-Hill/Irwin Inc. 4-36
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Solutions Manual
PROBLEM 4-32 (CONTINUED) 4.
Equivalent units measure the amount of manufacturing activity (i.e., for direct material or conversion) that has been applied to a batch of physical units. If, for example, a company has 1,000 physical units in process that are 30% complete as to conversion, the firm has done the equivalent amount of conversion activity as would be required to do all of the conversion work for 300 units (1,000 x 30%). Equivalent units are needed to state manufacturing activity on a common measurement scale. One cannot add completed units to units in process. Such a combination is like adding apples and oranges, as some units are complete and some are incomplete. Instead, these units are first converted to equivalent units, and the latter are then used in unit-cost calculations.
McGraw-Hill/Irwin Inc. Managerial Accounting, 8/e
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PROBLEM 4-33 (30 MINUTES) 1.
a. Equivalent units:
Tax Returns (physical units) Returns in process, February 1.. 300 Returns started in February........ 900 Total returns to account for........ 1,200 Returns completed during February..................... Returns in process, February 28 Total returns accounted for........ Total equivalent units of activity
800 400 1,200
Percentage of Completion with Respect to Conversion (labor and overhead) 20%
100% 75%
Equivalent Units Labor Overhead
800 300 ____ 1,100
800 300 ____ 1,100
Overhead £ 4,000 51,000 £55,000 1,100 £50.00
Total £ 7,500 141,000 £148,500
b. Costs per equivalent unit: Returns in process, February 1................... Costs incurred during February.................. Total costs to account for............................ Equivalent units............................................ Costs per equivalent unit............................. 2.
Labor £ 3,500 90,000 £93,500 1,100 £85.00
£135.00
Cost of returns in process on February 28: Labor:
equivalent units cost per equivalent unit 300 £85.00...................................................... Overhead: equivalent units cost per equivalent unit 300 £50.00...................................................... Total cost of returns in process on February 28.........................................
McGraw-Hill/Irwin Inc. 4-38
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£25,500 15,000 £40,500
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Solutions Manual
PROBLEM 4-34 (50 MINUTES) The missing amounts are shown below. A completed production report follows. Units started during January................................................................................ Units completed and transferred out during January......................................... Total equivalent units: conversion.......................................................................
55,000 60,000 66,000
Work in process, January 1: conversion............................................................. Costs incurred during January: direct material.................................................. Cost per equivalent unit: conversion................................................................... Cost of goods completed and transferred out during January.......................... Cost remaining in ending work-in-process inventory: direct material..............
$ 110,600 400,000 14.10 1,320,000 158,000
PRODUCTION REPORT: CANANDAIGUA CARPET COMPANY Weighted-Average Method Percentage of Completion with Equivalent Units Physical Respect to Direct Units Conversion Material Conversion Work in process, January 1............ 25,000 25% Units started during January.......... 55,000 Total units to account for................ 80,000 Units completed and transferred out during January..................... Work in process, January 31.......... Total units accounted for................ Total equivalent units......................
McGraw-Hill/Irwin Inc. Managerial Accounting, 8/e
60,000 20,000 80,000
100% 30%
© 2009
60,000 20,000 _____ 80,000
60,000 6,000 _____ 66,000
The McGraw-Hill Companies,
4- 39
PROBLEM 4-34 (CONTINUED)
Work in process, January 1............................. Costs incurred during January....................... Total costs to account for............................... Equivalent units............................................... Costs per equivalent unit................................
Direct Material $232,000 400,000 $632,000 80,000 $7.90
Conversion $110,600 820,000 $930,600 66,000 $14.10
Total $ 342,600 1,220,000 $1,562,600 $22.00
*$7.90 = $632,000 ÷ 80,000 † $14.10 = $930,600 ÷ 66,000 **$22.00 = $7.90 + $14.10 Cost of goods completed and transferred out during January:
numberofunits toalcostper × t ransfer dout equivalentunit
60,000
$22.00
$1,320,000
..............................................................
Cost remaining in January 31 work-in-process inventory: Direct material:
McGraw-Hill/Irwin Inc. 4-40
© 2009
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numberof costper equivalent × equivalent unitsof unitof d irectmaterial directmaterial
20,000
$7.90
$ 158,000
6,000
$14.10
84,600
................................................................
Conversion:
numberof costper equivalent equivalent
×
......................................................................
unitsof unitof
conversion conversion Total cost of January 31 work in process............................................... Check:
Cost of goods completed and transferred out...
McGraw-Hill/Irwin Inc. Managerial Accounting, 8/e
$242,600
$1,320,000 © 2009
The McGraw-Hill Companies,
4- 41
Cost of January 31 work-in-process inventory.. Total costs accounted for.................................... PROBLEM 4-35 (45 MINUTES)
242,600 $1,562,600
1.
PRODUCTION REPORT: MIXING DEPARTMENT (Weighted-Average Method) November 20x5 Percentage of Completion with Equivalent Units Physical Respect to Direct Units Conversion Material Conversion Work in process, November 1....... 5,000 70% Units started during November. .. . 17,000 Total units to account for.............. 22,000 Units completed and transferred out during November.......... Work in process, November 30 Total units accounted for.............. Total equivalent units....................
Work in process, November 1....... Costs incurred during November. Total costs to account for............. Equivalent units............................. Costs per equivalent unit..............
16,000 6,000 22,000
100% 30%
Direct Material $ 31,600 85,000* $116,600 22,000 $5.30
16,000 6,000 ____ _ 22,000
Conversion $ 55,220 210,000† $265,220 17,800 $14.90
16,000 1,800 _ ____ 17,800
Total $ 86,820 295,000 $381,820 $20.20
*$85,000 = $16,000 + $44,000 + (5,000 ÷ 12,000)($60,000) † $210,000 = $70,000 + (1.50)($70,000) + $35,000
McGraw-Hill/Irwin Inc. 4-42
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Solutions Manual
PROBLEM 4-35 (CONTINUED) Cost of goods completed and transferred out during November:
numberofunits toalcostper × t ransfer dout equivalentunit
..................................................................16,000
$20.20
$323,200
$5.30
$31,800
Cost remaining in November 30 work-in-process inventory Direct material:
numberof costper equivalent × equivalent unitsof unitof directmaterial directmaterial
...................................................................... 6,000
Conversion
McGraw-Hill/Irwin Inc. Managerial Accounting, 8/e
© 2009
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4- 43
numberof costper equivalent × equivalent unitsof unitof c onversion conversion
.......................................................................... 1,800
$14.90
26,820
Total cost of November 30 work in process.....................................................
2.
Check: Cost of goods completed and transferred out......... Cost of November 30 work-in-process inventory.. . Total costs accounted for.........................................
$323,200 58,620 $381,820
a. Work-in-Process Inventory: Mixing Department............. Raw-Material Inventory............................................
85,000
b. Work-in-Process Inventory: Mixing Department............. Wages Payable.........................................................
70,000
c. Work-in-Process Inventory: Mixing Department............. Manufacturing Overhead.........................................
140,000*
$58,620
85,000
70,000
140,000
*$140,000 = (1.50)($70,000) + ($35,000) d. Work-in-Process Inventory: Finishing Department........ Work-in-Process Inventory: Mixing Department...
McGraw-Hill/Irwin Inc. 4-44
© 2009
323,200 323,200
The McGraw-Hill Companies,
Solutions Manual
PROBLEM 4-36 (35 MINUTES) 1.
Conversion cost per unit in department I: =
direct labor +manufacturing overhead units produced* $76,000 5,500
$460,000
2,000
2,500
$53.60 per uni t
*Note that all of the products sold after processing in departments I, II, or III were produced orginally in department I. 2.
Conversion cost per unit in department II: =
direct labor +manufacturing overhead units produced*
$44,000 $136,000 2,000 2,500 $40.00 per unit
*Note that all of the products sold after processing in departments II and III were colored in department II. 3.
Cost of a clear glass sheet: direct material per = unit in department I $900,000 10,000
conversion cost per + unit in department I
$53.60
$143.60 per sheet
McGraw-Hill/Irwin Inc. Managerial Accounting, 8/e
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PROBLEM 4-36 (CONTINUED) 4.
Cost of an unetched, colored glass sheet: =
cost per clear glass sheet $143.60
direct material conversion cost per + per unit in department II + unit in department II
$144,000 4,500
$40.00
$215.60 per sheet
5.
Cost of an etched, colored glass sheet: cost per unetched = colored glass sheet $215.60
conversion cost per + unit in department III
$76,000 $147,500 2,500
$305.00 per sheet
PROBLEM 4-37 (40 MINUTES) 1.
The unit costs and total costs for each of the products manufactured by Plattsburg Plastics Corporation during the month of March are calculated as follows:
Units produced..................... Material costs....................... Unit material cost.......... Conversion costs*................ Unit conversion cost.....
Extrusion 32,000 $288,000 9.00 588,000 18.375
Form 22,000 $ 66,000 3.00 198,000 9.00
Trim 10,000 $22,500 2.25 103,500 10.35
Finish 4,000 $18,000 4.50 63,000 15.75
*Direct labor and manufacturing overhead.
McGraw-Hill/Irwin Inc. 4-46
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PROBLEM 4-37 (CONTINUED) Unit Costs Material costs: Extrusion........................ Form............................... Trim................................ Finish.............................. Conversion costs: Extrusion........................ Form............................... Trim................................ Finish.............................. Total unit cost....................... Units produced..................... Total product cost*...............
Plastic Sheets
Standard Model
Deluxe Model
Executive Model
$9.00
$9.00 3.00
$9.00 3.00 2.25
$9.00 3.00 2.25 4.50
18.375
18.375 9.00
_ $27.375 10,000 $273,750
_ $39.375 12,000 $472,500
18.375 9.00 10.35 _ $51.975 6,000 $311,850
18.375 9.00 10.35 15.75 $72.225 4,000 $288,900
*Total costs accounted for:
Product Plastic sheets Standard model Deluxe model Executive model Total 2.
Total Product Costs $ 273,750 472,500 311,850 288,900 $1,347,000
Journal entries: Work-in-Process Inventory: Extrusion.............................. Raw-Material Inventory............................................ Applied Conversion Costs.......................................
876,000
Finished-Goods Inventory................................................. Work-in-Process Inventory: Extrusion...................
273,750
Work-in-Process Inventory: Forming................................ Work-in-Process Inventory: Extrusion................... Raw-Material Inventory............................................ Applied Conversion Costs.......................................
866,250
McGraw-Hill/Irwin Inc. Managerial Accounting, 8/e
© 2009
288,000 588,000
273,750
602,250 66,000 198,000 The McGraw-Hill Companies,
4- 47
PROBLEM 4-37 (CONTINUED) Finished-Goods Inventory................................................. Work-in-Process Inventory: Forming.....................
472,500
Work-in-Process Inventory: Trimming.............................. Work-in-Process Inventory: Forming..................... Raw-Material Inventory............................................ Applied Conversion Costs.......................................
519,750
Finished-Goods Inventory................................................. Work-in-Process Inventory: Trimming....................
311,850
Work-in-Process Inventory: Finishing.............................. Work-in-Process Inventory: Trimming.................... Raw-Material Inventory............................................ Applied Conversion Costs.......................................
288,900
Finished-Goods Inventory................................................. Work-in-Process Inventory: Finishing....................
288,900
McGraw-Hill/Irwin Inc. 4-48
© 2009
472,500
393,750 22,500 103,500
311,850
207,900 18,000 63,000
288,900
The McGraw-Hill Companies,
Solutions Manual
PROBLEM 4-38 (45 MINUTES) 1.
Conversion costs:
Direct labor................................... Manufacturing overhead............. Total conversion cost.................. Total units produced: Rolling only........................... Rolling, molding, punching Rolling, molding, punching, and dipping Conversion cost per unit.............
McGraw-Hill/Irwin Inc. Managerial Accounting, 8/e
Rolling $ 600,000 900,000 $1,500,000
Molding $224,000 336,000 $560,000
Punching Dipping $256,000 $ 90,000 384,000 135,000 $640,000 $225,000
10,000 4,000
4,000 1,500
$150
$140
© 2009
$160
$150
The McGraw-Hill Companies,
4- 49
PROBLEM 4-38 (CONTINUED) 2.
Product costs: Ceralam Sheets Sold after Rolling Direct material: Ceralam sheets...............
Non reflective Ceralam Housings
$ 960,000
Relective Ceralam Housings
$
$
400,000
$1,600,000
240,000 60,000
Chemical dip...................
60,000
Conversion costs: Rolling............................. Molding........................... Punching......................... Dipping............................ Total cost...............................
375,000a 225,000a 350,000b 210,000b 400,000c 240,000c _______ ________ 225,000d $1,860,000 $1,525,000 $1,200,000
Units manufactured............... Unit cost.................................
6,000 $310
a
Number of units b Number of units c Number of units d Number of units 3.
Total Costs
900,000a
2,500 $610
1,500,000 560,000 640,000 225,000 $4,585,000
1,500 $800
rolling cost per unit ($150) molding cost per unit ($140) punching cost per unit ($160) dipping cost per unit ($150)
Journal entries: Work-in-Process Inventory: Rolling.................................. Raw-Material Inventory............................................ Applied Conversion Costs.......................................
3,100,000 1,600,000* 1,500,000 †
*$1,600,000 = direct-material cost for ceralam sheets † $1,500,000 = conversion cost in rolling operation
McGraw-Hill/Irwin Inc. 4-50
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PROBLEM 4-38 (CONTINUED)
Finished-Goods Inventory................................................. Work-in-Process Inventory: Rolling........................
1,860,000* 1,860,000
*$1,860,000 = 6,000 ceralam sheets sold after rolling $310 per unit Cost of Goods Sold............................................................ Finished-Goods Inventory.......................................
1,860,000* 1,860,000
*$1,860,000 = cost of ceralam sheets sold after rolling Work-in-Process Inventory: Molding................................ Work-in-Process Inventory: Rolling........................
1,240,000* 1,240,000
*$1,240,000 = cost remaining in Work-inProcess Inventory: Rolling = $3,100,000 – $1,860,000 Work-in-Process Inventory: Molding................................ Applied Conversion Costs.......................................
560,000* 560,000
*$560,000 = conversion cost in molding operation Work-in-Process Inventory: Punching.............................. Work-in-Process Inventory: Molding......................
1,800,000* 1,800,000
*$1,800,000 = cost remaining in Work-inProcess Inventory: Molding = $1,240,000 + $560,000 Work-in-Process Inventory: Punching.............................. Applied Conversion Costs.......................................
640,000* 640,000
*$640,000 = conversion cost in punching operation
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PROBLEM 4-38 (CONTINUED) Finished-Goods Inventory................................................. Work-in-Process Inventory: Punching.................... *$1,525,000 = 2,500 nonreflective ceralam housings sold after punching per unit
1,525,000* 1,525,000
$610
Cost of Goods Sold............................................................ Finished-Goods Inventory.......................................
1,525,000* 1,525,000
*$1,525,000 = cost of nonreflective ceralam housings sold after punching Work-in-Process Inventory: Dipping................................. Work-in-Process Inventory: Punching....................
915,000* 915,000
*$915,000 = cost remaining in Work-in-Process Inventory: Punching = $1,800,000 + $640,000 – $1,525,000 Work-in-Process Inventory: Dipping................................. Raw-Material Inventory............................................ Applied Conversion Costs.......................................
285,000 60,000* 225,000 †
*$60,000 = direct-material cost for chemical dip † $225,000 = conversion cost in dipping operation Finished-Goods Inventory................................................. Work-in-Process Inventory: Dipping.......................
1,200,000* 1,200,000
*$1,200,000 = 1,500 reflective ceralam housings sold after dipping $800 per unit Cost of Goods Sold............................................................ Finished-Goods Inventory.......................................
4.
1,200,000 1,200,000
The electronic version of the Solutions Manual “BUILD A SPREADSHEET SOLUTIONS” is available on your Instructors CD and on the Hilton, 8e website: www.mhhe.com/hilton8e.
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SOLUTION TO CASE CASE 4-39 (45 MINUTES) 1.
Equivalent units of material....................................................................... Equivalent units of conversion..................................................................
8,500 8,260
2.
Cost per equivalent unit of material.......................................................... Cost per equivalent unit of conversion.....................................................
$6.00 $7.00
3.
October 31 work-in-process inventory..................................................... Cost of goods completed and transferred out.........................................
$3,520 $105,300
4.
Weighted-average unit cost of completed leather belts..........................
$13.00
These answers are supported by the following process-costing schedules. The firm's cost per belt used for planning and control, $11.50, is substantially lower than the actual cost per belt incurred in October, $13.00. Management should investigate this situation to determine whether production costs can be reduced. If not, then the cost used for planning and control purposes should be changed to reflect the firm's actual experience. CALCULATION OF EQUIVALENT UNITS: LYCOMING LEATHER CO. - HARRISBURG PLANT Weighted-Average Method Percentage of Completion with Equivalent Units Physical Respect to Direct Units Conversion Material Conversion Work in process, October 1............. 500 30% Units started during October........... 8,000 Total units to account for................. 8,500 Units completed and transferred out during October......................... Work in process, October 31........... Total units accounted for................. Total equivalent units.......................
McGraw-Hill/Irwin Inc. Managerial Accounting, 8/e
8,100 400 8,500
100% 40%
© 2009
8,100 400
8,100 160
8,500
8,260
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CASE 4-39 (CONTINUED) CALCULATION OF COSTS PER EQUIVALENT UNIT: HARRISBURG PLANT Weighted-Average Method Direct Material Conversion Total Work in process, October 1.............................. $ 2,000 $ 2,500 $ 4,500 Costs incurred during October........................ 49,000 55,320 104,320 ............................................................................ Total costs to account for................................. $51,000 $57,820 $108,820 Equivalent units................................................. 8,500 8,260 Costs per equivalent unit.................................. $6.00 $7.00 $13.00 ANALYSIS OF TOTAL COSTS: HARRISBURG PLANT Weighted-Average Method Cost of goods completed and transferred out during October:
numberofunits toalcostper × t ransfer dout equivalentunit
8,100
$13.00
$105,300
............................................................
Cost remaining in October 31 work-in-process inventory: Direct material:
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numberof costper equivalent × equivalent unitsof unitof d irectmaterial directmaterial
400
$6.00
$2,400
160
$7.00
1,120
................................................................
Conversion:
numberof costper equivalent equivalent
×
......................................................................
unitsof unitof
conversion conversion Total cost of October 31 work in process...............................................
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