INDIAN INSTITUTE OF MANAGEMENT VISAKHAPATNAM

MANACC – PGP 2021-23

Class Handout – (Session 4&5)

1. Petro Tech Company refines a variety of petrochemical products. The following data are from the firm’s
Amarillo plant.

Work in process, July 1 (B’WIP) 1,900,000 liters

Direct material 100% complete
Conversion 30% complete
Units started in process during July (started New) 750,000 liters
Work in process, July 31 (E’WIP) 250,000 liters
Direct material 100% complete
Conversion 70% complete

Required: Compute the equivalent units of direct material and conversion for the month of July.
Use the weighted average method processing costing.

1900000+750000= Finished+ 250000

= 2400000
Calculation of Equivalent units:

Material. Conversion.
Completed 2400000*100%. 2400000*100%.
E’WIP 250000*100% 250000*70% (175000)

Total 2650000 2575000

2. The following data pertain to Tuscaloosa Paperboard Company, a manufacturer of cardboard boxes.

Work in process, March 1 10,000 units*

Direct material $ 10,900
Conversion $ 28,950
Cost incurred during March
Direct material $112,700
Conversion $160,200
*complete as to direct material; 35% complete as to conversion.

The equivalent units of activity for March were as follows:

Direct material (weighted – average method) 103,000
Conversion (Weighted – average method) 97,000
Completed and transferred out 89,000

Required: Compute the following amounts using weighted-average process costing.

1. Cost of goods completed and transferred out during March.
 Calculation of Equivalent units:

Material. Conversion.
Completed 85000. 89000
E’WIP 14000 8000.

Total 103000 97000

Cost Schedule
Material Conversion

B’WIP 10900 28950

Started New 112700 160200

Rate = Material: $1.2, Conversion: $ 1.95

Cost of goods Produced and moved out = 89000 (1.2 +1.95)

2. Cost of the March 31 work – in – process inventory.

Cost of E’WIP = 14000*1.2 + 8000 * 1.95

3. Toronto Titanium Corporation manufactures a highly specialized titanium sheathing material that is
used extensively in the aircraft industry. The following data have been compiled for the month of
June. Conversion activity occurs uniformly throughout the production process.

Work in process, June 1 - 40,000 units.

Direct material: 100% complete, cost of $110,500
Conversion: 38% complete, cost of $ 22,375
Balance in work in process, June 1 $132,875
Units started during June 190,000
Units completed during June and transferred out to finished-goods inventory 180,000
Work in process, June 30:
Direct material: 100% complete
Conversion: 55% complete
Costs incurred during June:
Direct material $430,000
Conversion costs:
Direct labor $128,000
Applied manufacturing overhead $ 192,000
Total conversion costs $320,000
Required: Prepare schedules to accomplish each of the following process costing steps for the
month of June. Use the weighted average method of process costing.
1. Analysis of physical flow of units.

B’WIP+ Started= Finished & completed + E’WIP

= 40000+ 190000 = 180000 + E’WIP

 E’WIP = 50000 units

2. Calculation of equivalent units.

Material Conversion
Completed 100%*180000 100%* 180000
E’WIP 100%*50000 55%*50000 =27500
230000 207500

3. Computation of unit costs.

Material Conversion
B’WIP 110,500 22,375
Started New 430,000 320,000
540500 342375

Unit Cost= 540500/230000. 342375/207500

4. Analysis of total costs.

a) Cost of items completed & moved out = 180000 (2.35 + 1.65)

b) Cost of E’WIP = 50000* 2.35 + 27500 * 1.65

4.Energy Resource Company refines a variety of petrochemical products. The following data are from
the firm’s Amarillo plant.
Work in process, November 1 2,000,000 gallons
Direct material 100% complete
Conversion 25% complete
Units started in process during November 950,000 gallons
Work in process, November 30 240,000 gallons
Direct material 100% complete
Conversion 80% complete

Required:
Compute the equivalent units of direct material and conversion for the month of November. Use the
FIFO method of process costing.

Physical Flow

2000000 (100% mat, 25% convers) + 950000 = Completed +240,000 (100% mat, 80% conversion)

= 2710000

Equivalent Units:

Material Conversion
Completed 2710000 2710000
E’WIP 240000 80%* 240000 = 192000
2950000 2902000

Less B’WIP (2000) (500) 25% 2000

2948000 2901500
5. Moravia Company processes and packages cream cheese. The following data have been compiled for
the month of April. Conversion activity occurs uniformly throughout the production process.

Work in process, April 1—10,000 units:

Direct material: 100% complete, cost of $ 22,000
Conversion: 20% complete, cost of 4,500
Balance in work in process, April 1 $ 26,500
Units started during April 100,000
Units completed during April and transferred out to finished-goods inventory 80,000
Work in process, April 30
Direct material: 100% complete
Conversion: 33 1/3% complete
Costs incurred during April:
Direct material $198,000
Conversion costs:
Direct labor $ 52,800
Applied manufacturing overhead 105,600
Total conversion costs $158,400

Required:
Prepare schedules to accomplish each of the following process-costing steps for the month of April.
Use the FIFO method of process costing.

1. Analysis of physical flow of units.

B’WIP+ Started = Completed + E’WIP
10000+ 100000 = 80000 + E’WIP
E’WIP= 30000
2. Calculation of equivalent units.
Material Conversion
Completed 80000 80000
E’WIP 30000*100% = 30000 1/3* 30000 = 10000
110000 90000

Less B’WIP ( 10000) (2000) 20% of 10000

100000 88000

3. Computation of unit costs.

Material Conversion
B’WIP (we will not consider) 0 0
Incurred during the year 198000 158400
198000 158400

Unit Rate= 198000/100000= 1.98 158400/ 88000=1.8

4. Analysis of total costs.

a) Cost of items completed & moved out =

New Completed 70000* (1.98 + 1.8), old stock: 26,500 + (1.8* 80*10000) + 10000*0 for material

b) Cost of E’WIP = 30000* 1.98 + 1/3* 30000* 1.8

6. Celestial Glass Company manufactures a variety of glass windows in its Charleston plant. In
department I clear glass sheets are produced, and some of these sheets are sold as finished goods.
Other sheets made in department I have metallic oxides added in department II to form colored
glass sheets. Some of these colored sheets are sold; others are moved to department III for
etching and then are sold. The company uses operation costing.
Celestial Glass Company’s production costs applied to products in August are given in the
following table.

There was no beginning or ending inventory of work in process for August.

Cost Category Dept. I Dept. II Dept.
III
Direct material $900,000 $144,000 -0-
Direct labor 76,000 44,000 $76,000
Manufacturing overheads 460,000 136,000 147,500

Products Dept. I Dept.II

Units Dir.Mat. Dir. Mat.
Clear glass, sold after dept. I 5,500 $495,000 -0-
Unetched colored glass, sold after dept. II 2,000 180,000 $64,000
Etched colored glass, sold after dept. III 2,500 225,000 80,000

Each sheet of glass requires the same steps within each operation.

Required:
Compute each of the following amounts.
1. The conversion cost per unit in department I
2. The conversion cost per unit in department II
3. The cost of a clear glass sheet.
4. The cost of a unetched colored glass sheet.
5. The cost of an etched colored glass sheet.