Guided Example

Chapter 4 – Process Costing

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Exercise 4-6 Equivalent Units of Production—Weighted-Average Exercise 4-6

Method
Exercise 4-7 Process Costing Journal Entries Exercise 4-7

Exercise 4-8 Equivalent Units; Cost per Equivalent Unit; Assigning Exercise 4-8
Costs to Units—Weighted-Average Method
Exercise 4-9 Equivalent Units and Cost per Equivalent Unit— Exercise 4-9
Weighted-Average Method
Guided Example

Exercise 4-6
Guided Example

Duntroon Company uses the weighted-average method in its process costing system. It processes
used tires for various manufacturers of basketball courts. Data relating to tons of tires processed
during November are provided below:

Percent Completed
Tons Materials Labor and
Overhead
Work in process, November 1 18,000 80% 60%
Work in process, November 30 37,000 40% 50%
Started into production during November 225,000

Required:
1. Compute the number of tons of tires completed and transferred out during November.
2. Compute the equivalent units of production for materials and for labor and overhead for
November.

[LO2]
Guided Example

Requirement 1: Compute the number of tons of tires completed and

transferred out during November.

Tons
Work in process, November 1 18,000
Started into production during the month 225,000
Total tons in process 243,000
Deduct work in process, November 30 37,000
Completed and transferred out during the month 206,000

Requirement 2: Compute the equivalent units of production for

materials and for labor and overhead for November.

Equivalent Units
Labor &
Materials
Overhead
Units transferred out 206,000 206,000
Work in process, ending:
37,000 units × 40% 14,800
37,000 units × 50% 18,500
Equivalent units of production 220,800 224,500
Guided Example

Exercise 4-7
 Guided Example

London’s Lollies, LLC is located in the heart of London, England. The company makes molded
lollipops that are sold in popular embossed tins. The company has two processing departments—
Mixing and Setting. In the Mixing Department, the raw ingredients for the lollipops are mixed and
then cooked in special vats. In the Setting Department, the melted candy and other ingredients
from the Mixing Department are carefully poured into molds and sticks and decorative flourishes
are applied by hand. After cooling, the lollipops are packed for sale. The company uses a process
costing system. The T-accounts below show the flow of costs through the two departments in
June:

Work in Process—Mixing Work in Process—Setting

Balance 6/1 15,000Transferred out 245,000 Balance 6/1 90,000Transferred out 440,000
Direct materials 65,000 Transferred in 245,000
Direct labor 90,000 Direct labor 47,000
Overhead 85,000 Overhead 67,000

Required:
Prepare journal entries showing the flow of costs through the two processing departments during
June.

[LO1]
 General Journal
Debit Credit

Work in Process-Mixing Department 65,000

Raw Materials 65,000
(To record issuing raw materials for use in production)

Work in Process-Mixing Department 90,000

Work in Process-Setting Department 47,000
Wages Payable 137,000
(To record direct labor costs incurred)
Work in Process-Mixing Department 85,000
Work in Process-Setting Department 67,000
Manufacturing Overhead 152,000
(To record applying manufacturing overhead)
Work in Process-Setting Department 245,000
Work in Process-Mixing Department 245,000
(To record transfer of work in process from the
Mixing Department to the Setting Department)
 General Journal
Debit Credit
(e) Finished Goods 440,000
Work in Process-Setting Department 440,000
(To record transfer of finished cans from the Setting
Department to the Finished Goods warehouse)
Guided Example

Exercise 4-8
Guided Example

Oscar Corporation uses the weighted-average method in its process costing system. It produces
prefabricated tiles in a series of steps carried out in production departments. All of the material that is
used in the first production department is added at the beginning of processing in that department.
Data for March for the first production department follow:

Percent Complete
Units Materials Conversion
Work in process inventory, March 1 9,000 100% 50%
Work in process inventory, March 31 15,000 100% 60%
Materials cost in work in process inventory, March 1 $6,000
Conversion cost in work in process inventory, March 1 $10,900
Units started into production 195,000
Units transferred to the next production department 189,000
Materials cost added during March $45,000
Conversion cost added during March $395,000
Required:
1. Calculate the first production department's equivalent units of production for materials and
conversion for March.
2. Compute the first production department's cost per equivalent unit for materials and conversion
for March.
3. Compute the first production department's cost of ending work in process inventory for materials,
conversion, and in total for March.
4. Compute the first production department's cost of the units transferred to the next production
department for materials, conversion, and in total for March. [LO2], [LO3], [LO4]
Guided Example

Requirement 1: Calculate the first production department's equivalent

units of production for materials and conversion for March.

Equivalent Units
Materials Conversion
Units transferred out 189,000 189,000
Work in process, ending:
15,000 units × 100% 15,000
15,000 units × 60% 9,000
Equivalent units of production 204,000 198,000

Requirement 2: Compute the first production department's cost per

equivalent unit for materials and conversion for March

Materials Conversion
Cost of beginning work in process
inventory $6,000 $10,900
Cost added during the period 45,000 395,000
Total cost (a) $51,000 $405,900
Equivalent units of production (b) 204,000 198,000
Cost per equivalent unit (a) ÷ (b) $0.25 $2.05
Guided Example

Requirements 3 and 4: Compute the first production department's cost

of ending work in process inventory for materials, conversion, and in
total for March, and compute the first production department's cost of
the units transferred to the next production department for materials,
conversion, and in total for March.

Materials Conversion Total

Ending work in process inventory:
Equivalent units of production 15,000 9,000
Cost per equivalent unit $0.25 $2.05
Cost of ending work in process inventory $3,750 $18,450 $22,200

Units completed and transferred out:

Units transferred to the next department 189,000 189,000
Cost per equivalent unit $0.25 $2.05
Cost of units transferred out $47,250 $387,450 $434,700
Guided Example

Exercise 4-9
Guided Example

Willkens, Inc., uses the weighted-average method in its process costing system. It manufactures a
product that passes through two departments. Data for a recent month for the first department
follow:
Units Materials Labor Overhead
Work in process inventory, beginning 10,000 $9,500 $4,250 $7,790
Units started in process 65,000
Units transferred out 66,000
Work in process inventory, ending 9,000
Cost added during the month $52,720 $21,514 $32,212

The beginning work in process inventory was 90% complete with respect to materials and 50%
complete with respect to labor and overhead. The ending work in process inventory was 80%
complete with respect to materials and 20% complete with respect to labor and overhead.

Required:
1. Compute the first department's equivalent units of production for materials, labor, and
overhead for the month.
2. Determine the first department's cost per equivalent unit for materials, labor, and overhead
for the month.

[LO2], [LO3]
Guided Example

Requirement 1: Compute the first department's equivalent units of

production for materials, labor, and overhead for the month.

Equivalent Units
Materials Labor Overhead
Units transferred out 66,000 66,000 66,000
Work in process, ending:
9,000 units × 80% 7,200
9,000 units × 20% 1,800 1,800
Equivalent units of production 73,200 67,800 67,800

Requirement 2: Determine the first department's cost per equivalent

unit for materials, labor, and overhead for the month.

Materials Labor Overhead

Cost of beginning work in process
inventory $9,500 $4,250 $7,790
Cost added during the period 52,720 21,514 32,212
Total cost (a) $62,220 $25,764 $40,002
Equivalent units of production (b) 73,200 67,800 67,800
Cost per equivalent unit (a) ÷ (b) $0.85 $0.38 $0.59