UNIVERSITY OF SANTO TOMAS ALFREDO M. M. VELAYO COLLEGE COLLEGE OF OF ACCOUNTANCY ACCOUNTANCY SOCIETY OF BUSINESS MANAGERIAL ACCOUNTANTS A.Y. 2016-2017 2016-2017
COST ACCOUNTING (PROCESS COSTING)
PROBLEM 1 Compute the equivalent units of production of conversion cost for each of the following independent cases A. In process, end (5/8 incomplete) In process, beg (1/3 to be completed) (Units started in process is 175% of the work in process at the end)
42,400 units 29,250 units
1. EUP using FIFO B. In process, beg (3/5 additional work to be done) Finished and Transferred units (Of the units started in process, ½ represent work in process at the end which were 20% completed during the current period)
10, 125 units 15,570 units
2. EUP using Average
PROBLEM 2 IDOL Inc. adds materials at the beginning of the process in department USB conversion costs were 70% complete as to the 9,500 work-in-process units on September 1 and 40% incomplete as to the 7,000 work-in-process units on September 30. During September, 12 ,000 units were completed and transferred to the next department. An analysis of the cost relating to work -in-process on September 1 and to production activity for September is as follows: (2 decimal places)
Costs
Work-In-process, September 1 Costs Incurred during September
Materials
Conversion
P10,000 P42,750
P7,500 P52,525
3. The total cost per equivalent unit for September under FIFO 4. The total cost per equivalent unit for September under average
PROBLEM 3 The following information is available for Updharmadown Corporation for the current month:
Started this month Beginning WIP (3/5 incomplete) Total spoilage Abnormal spoilage Ending WIP (30% to be done) Transferred out
120,000 11,250 3,000 1,350 ? 108,750
Beginning Work In Process Costs: Material Conversion
P15,600 P20,700
Current Costs: Material Conversion
P180,000 P525,915
units units units units units
All materials are added at the start of production and inspection point is at the end o f the process. Using the more accurate method representing the physical flow of units. 5. Total costs of units transferred out 6. The amount of work in process e nd 7. Cost of abnormal loss units
PROBLEM 4 Housemartins Corporation has the following information for the current month Units started Beginning Work In Process (65% to be done) Total Spoilage Spoilage within tolerance level Ending Work In Process (20% incomplete) Transferred out
175,000 35,000 14,875 6,125 23,375 ?
Beginning Work In Process Costs: Material Conversion
P46,250 P60,675
Current Costs: Material Conversion
P170,625 P265,335
units units units units units units
All materials are added at the start of the production process. Housemartins Corporation inspects goods at 100 percent completion as to conversion. Using the method that does not commingle the beginning and the current period production activity. 8. What are the equivalent units of production for the conversion cost? 9. Total costs of transferred out units 10. The amount of work-in-process, end
PROBLEM 5 The Fantastic Decorations Corporation makes wreaths in two departments: Forming and Decorating. Forming began the month with 500 wreaths in process that were 100 percent complete as to material and 40 percent complete as to conversion. During the month, 6,500 wreaths were started and 4,900 units were completed. At month end, Forming had 1,200 wreaths that were still in process that were 100 percent complete as to material and 50% complete as to conversion. The company expects spoilage
of no more than 10% of the units started in process. Assume Forming uses the weighted average method of process costing. Costs in the Forming De partment are as follows: Beginning Work In Process Costs: Material Conversion
P1,690 P2,300
Current Costs: Material Conversion
P14,820 P20,125
The Decorating Department had 600 w reaths in process at the beginning of the month that is 90% incomplete as to conversion. The department had 800 units in ending Work In Process that were 85% complete as to conversion. Inspection is done when the wreaths are 80% complete. After this, the ribbons are added to the units. 4,100 units were completed during the month. Spoilage of no more than 3% of the units started and completed in considered to be normal. Decorating uses t he FIFO method of process costing and costs associated with Decorating are: Beginning WIP inventory Transferred In Ribbon Conversion
1,170 6,210
Current Period: Transferred In Ribbon Conversion
? P26,980 P95,820
11. Total costs of units transferred out to Decorating Department 12. The amount of work in process, e nd in the Forming Department 13. Cost of abnormal loss units in Forming Department 14. What are the equivalent units of production for materials in Decorating Department? 15. What are the equivalent units of production for conversion cost in Decorating Department?
Answer Key 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.
57 450 16 875 10 6.49 645 690 88 627.50 7 897.50 192 675 469 606 52 696 31 850 5 460 1 625 4 900 5 200
UNIVERSITY OF SANTO TOMAS ALFREDO M. VELAYO COLLEGE OF ACCOUNTANCY SOCIETY OF BUSINESS MANAGERIAL ACCOUNTANTS A.Y. 2016-2017
COST ACCOUNTING (JOINT AND BY PRODUCT) Problem Solving A. The Fantastic Decorations Corporation makes wreaths in two departments: Forming and Decorating. Forming began the month with 500 wreaths in process that were 100 percent complete as to material and 40 percent complete as to conversion. During the month, 6,500 wreaths were started and 4,900 units were completed. At month end, Forming had 1,200 wreaths that were still in process that were 100 percent complete as to material and 50 percent complete as to conversion. The company expects spoilage of no more than 10 percent of the units started in process. Assume Forming uses the weighted average method of process costing. Costs in the Forming Department are as follows: Beginning Work in Process Costs: Material Conversion Current Costs: Material Conversion
P3,175 6,350 P5,233 15,697
The Decorating Department had 600 wreaths in process at the beginning of the month that is 90 percent incomplete as to conversion. The department had 300 units in ending Work in Process that were 75 percent complete as to conversion. Inspection is done when the wreaths are 60 percent complete. Ribbons are added at 65 percent completion. Other materials are assumed to be added evenly throughout the decoration process. 4,100 units were completed during the month. Spoilage of no more than 15 percent of the units started and completed is considered to be normal. Decorating uses the FIFO method of process costing, and the costs associated with Decorating are: Beginning WIP Inventory: Transferred In Other Materials Ribbon Conversion Current Period: Transferred In Other Materials Ribbon Conversion
1. 2. 3. 4. 5.
P3,144 768 823 ? P64,025 27,192 45,057
How much is Forming department’s work in process inventory? What is the amount of the transferred out cost of the Forming department?
How much is the total normal loss shouldered by the units started and completed? How much is the cost of goods manufactured for the month? What is the total cost to be charged to profit or loss for the month ?
B. Stockton Company makes a chemical spray that goes through two processes. Data for February are as follows:
Mixing Department Gallons transferred to Boiling Department Gallons transferred to finished goods Gallons on hand at the end of the month Percent complete as to conversion Gallons on hand at the beginning of the month Percent incomplete as to conversion
Costs incurred during February Other materials Chemical X Chemical Y Conversion cost
Boiling Department
75,000 9,000 40% 8,000 50%
68,000 15,000 65% 8,000 85%
P69,825 100,547 N/A 210,910
N/A N/A P672,214 287,499
Cost in beginning inventory Other materials Chemical X Chemical Y Prior department costs Conversion cost
P9,975 23,203 N/A N/A 60,260
N/A N/A P118,626 65,000 29,741
Other materials Chemical X and Chemical Y are added at the beginning, 45 percent and 90 percent completion respectively. Stockton uses the weighted average cost accumulation system.
Compute for the following: 6. The sum of the cost per EUP in the Mixing department. 7. Other materials cost contained in the ending work in process inventory of Mixing department. 8. Total cost of the ending inventory units for February in the Boiling department. 9. Assuming the company has no balance in its fi nished goods inventory beginning account and it has sold 61,900 units, what is the balance of cost of goods sold?
C. Sheldon Inc. purchases logs from independent timber contractors and proce sses them into three types of lumber products as follows: a. Studs for residential construction (walls and ceilings) b. Decorative pieces (fireplace mantels and beams for cathedral ceilings) c. Posts used as support braces (mine support braces for exterior fences around ranch properties) These products are the result of a joint process that involves removing bark from the logs, cutting the logs into a workable size and then cutting the individual products from the logs, depending upon the type of wood (pine, oak, walnut, or maple) and the size (diameter) of the log.
Total joint costs amounted to P5,000,000. Product yield and sales value on a per-unit basis are as follows:
Product Studs Decorative pieces Posts
Monthly output
Fully processed sales price
Cost to sell
P243,750 68,900 48,750
P8 100 20
P2 10 3
The studs and posts require no further processing whereas the decorative pieces must be planed and further sized after emerging from the sawmill. This additional processing costs P1,378,000 per month. Without this planning and sizing process, there is still an active market for the unfinished decorative pieces where the sales and prices averages P50 per unit. The cost that the company will incur to be able to sell the product will be the same regardless of their decision ti sell as is or process further. The company uses the relative sales value method of allocating joint cost and plans to maximize their profit for the period.
10. How much is the cost per unit of studs? 11. What is the total joint costs allocated to posts? 12. Assume that 35,000 studs, 5,000 decorative pieces and 12,000 posts are unsold at year end and the balance in finished goods inventory beginning is zero, how much is the cost of goods sold?
D. A pharmaceutical company processes a material which is to yield three outputs, Product D, E, and F. The company has purchased P850,000 worth of raw materials and incurred conversion costs of P350,000. Product
Gallons produced
Selling price at split off point
Further processing processing cost
Final selling price
D
22,000
P40
P180,000
P58
E
23,000
30
150,000
35
F
25,000
55
120,000
59
13. Which product/s must be sold at split off point? 14. By how much will the profit decrease if the company chooses to process all the products further?
E. Quartz Company manufactures three different products from using a single raw material. Pertinent information is presented below:
Kilos of output Selling price per kilo Cost to sell per kilo
Amethyst
Sapphire
Turquoise
165,000 P17.25 2.75
231,000 9.40 3.05
264,000 12.45 2.40
Separate Processing Cost Amethyst Materials Direct Labor Variable factory overhead Fixed factory overhead
P250,000 123,750 297,000
Sapphire
P340,000 173,250 202,000
Total Cost
Turquoise
P690,000 198,000 101,000
P1,500,000 1,280,000 495,000 600,000
All the units produced were also sold during the year except 46,200 units of sapphire. There was no finished goods inventory beginning.
Assume the use of physical measure of allocating joint cost:
15. What is the gross profit for Quartz Company? 16. What is the net income of Quartz for the year? 17. What is the balance of finished goods inventory end? Assume the use of relative sales value method of allocating joint cost (no rounding off for the percentage to be used for allocation): 18. How much of the total joint cost was allocated to Sapphire? 19. How much is the cost per unit of Turquoise? 20. What is the amount to be reported as operating expense for the year? 21. How much is the net income of Quartz for the year?
F.
The following information relating to the cost of quality if Hansen Company is presented below: Recruiting Continuing supplier verification Packaging inspection Litigation Quality training Marketing research Quality audits Warranty costs Discounts due to defects Rework costs Lost profit from selling defective units
P350,000 250,000 50,000 50,000 275,000 125,000 134,000 35,600 45,000 37,800 69,800
Compute the following: 22. Total prevention cost. 23. Total appraisal cost. 24. Total internal failure cost. 25. Total external failure cost.
G. Maxwell Company has presented you with the following information: Defective units Units reworked Customer claims processed Discounts due to defects
1,500 700 845 P12,250
Warranty expense Profit per unit of regular sales Profit per unit of defective units Cost per customer claim processed Rework cost per unit
56,800 36 22 45 5
26. How much is the lost from profit from selling defective units? 27. How much is the total cost of noncompliance?
Answer Key 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27.
3 882 25 235 8 240 144 075 11 922 6.05 8 550 133 530 1 359 324 6.28 765 306 5 673 605 Product E and F 55 000 4 243 220 2 592 230 248 050 392 211 6 1 650 990 2 565 671 884 000 300 000 107 600 130 600 11 200 121 775
UNIVERSITY OF SANTO TOMAS ALFREDO M. VELAYO COLLEGE OF ACCOUNTANCY SOCIETY OF BUSINESS MANAGERIAL ACCOUNTANTS A.Y. 2016-2017
COST ACCOUNTING (STANDARD COSTING) Problem 1 Compute for the missing items: nos. 1-12 ar e based on the foregoing:
CASE I (2-Way) Standard Factory Overhead Controllable Variance Total Factory Overhead Variance
P 7,500 P 500 - F P 500 - UF
1. Actual Factory Overhead 2. Budgeted Overhead based on standard hours 3. Volume Variance
Standard Factory Overhead Spending Variance Volume Variance Variable Efficiency Variance
CASE II (3-Way) P 9,800 P 1000 - F P 500 - UF P 200 - UF
4. Budgeted OH based on Standard Hours 5. Budgeted OH based on Actual Hours 6. Actual Factory Overhead 7. Total Factory OH Variance
Standard Factory Overhead Efficiency Variance Variable Spending Variance Actual Fixed Overhead Standard Hours Allowed Normal Capacity
CASE III (4-Way) P 10.00 (40% is fixed) P 200 - F P 1,400 - UF P 6,500 1,800 hours 2,000 hours
8. Actual Factory Overhead 9. Volume Variance 10. Fixed Spending Variance 11. Actual hours worked 12. Total Factory Overhead cost variance
Problem 2 The standard cost of one unit of a manufactured product of JUGGERNAUT Company follows: Materials - 5 pounds @ P0.20
Labor - 4 hours @ P7.00 per hour
Actual date for the month of October: Materials purchased Materials used to manufacture 10,000 units Actual direct labor hours
100,000 lbs. @ P0.21 per lb 60,000 lbs. 39,000 @ P6.80/hr
13. Material purchase price variance 14. Labor efficiency variance 15. Labor rate variance 16. Material quantity variance
Problem 3 The PSYLOCKE Company manufactures one product and provides you with the follwingin formation for the year 2012: Normal direct labor hours - 155,000 Actual Variable OH - P475,000 Standard fixed OH - P4.00/hr Total Budgeted factory OH - P1,085,000
Actual direct labor hours - 148,000 Actual fixed OH - P632,500 Units manufactured - actual 60,000
Based on the standard, it takes 2 .5 hours to produce a finished unit. 17. Variable overhead spending variance 18. Variable efficiency variance 19. Fixed overhead spending variance 20. Fixed overhead volume variance
Problem 4 Selected data for SENTINEL COMPANY is as follows: Standard wage rate - P5.00 Actual wage rate - P4.75
Labor efficiency variance - P400 FAV Standard hours allowed for actual production - 7,500
21. Calculate the actual hours worked rounded to the nearest hour. 22. How much is the total labor variance?
Problem 5 During August 2012, WAR MACHINE Company produced 1,000 units of a product. Actual material cost is P2.20 per pound. The direct mater ial standard requires 4 pounds of material per unit of product at a standard price of P2.00 per pound. The material pr ice variance is P720. Assume the quantity purchased and used is the same. 23. Compute for the material usage variance.
Problem 6 The BLACKHEART HOSPITAL performs blood tests in its laboratory. The following standards have been set for each blood rest performed.
Item Direct Materials Direct Labor Variable overhead
Std. Price or Quantity 2 plates 0.2 hours 0.2 hours
Std. Rate or hours P2.75 per plate P15.00 per hour P7.00 per hours
During October, the laboratory performed 1,500 blood tests. On October 1, there were plates on hand; after a plate is used fo r a blood test it is discarded. Variable overhead is assigned to blood tests on the basis of direct labor hours. The following events occurred during October: A. 3,600 plates were purchased at a cost of P9,540 B. 3,00 plated were used for blood tests C. 340 actual direct labor hours were worked at a cost of P5,100 D. Actual Variable overhead - P2,500
Compute the following: 24. The material price variance 25. The material quantity variance 26. The labor rate variance 27. The labor efficiency variance 28. The variable overhead spending variance
Answer Key 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28.
8 000 8 500 1 000 UF 10 300 10 500 9 500 300 F 18 500 800 UF 1 500 F 1 767 500 UF 1 000 UF 7 000 F 7 800 F 2 000 UF 31 000 UF 6 000 F 12 500 UF 20 000 UF 7 420 2 255 F 800 F 360 F 550 UF 0 600 UF 120 UF
