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Process Costing
Process Costing
• The costs of units completed are transferred from Beginning inventory (1 - % of completion) xxx
one department to another as those units move Started & completed xxx
through the manufacturing process. Ending inventory x % of completion xxx
Weighted average, EUP xxx
• The costs of completed work are transferred to
Finished Goods Inventory.
• Lost units: EUP SCHEDULE
• When inventory is sold, costs are transferred to
▪ Discrete: Normal/Abnormal
Cost of Goods Sold.
✓ Direct materials
Assignment of manufacturing costs
o If the placement took place first, then
• The accumulation of the costs of materials, labor,
100%
and manufacturing overhead is the same in a
process cost system as in a job order cost system.
o If the inspection took place first, then 0%
• Entries to assign the costs of raw materials, factory
✓ Conversion costs
labor, and overhead consist of a debit to Work in
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Process for each department and a credit to Raw
o Lost units x % of inspection
Materials Inventory, Factory Labor, and
Manufacturing Overhead.
▪ Continuous Loss – method of neglect
• The entry to record units completed and
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- - End - -
Formulas related to process costing
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PROCESS COSTING
THEORY
1. What is the best cost accumulation procedure to use when a single product is manufactured in a continuous
process?
a. Process c. Standard
b. Job order d. Actual
3. The FIFO method of process costing differs from the average method in that the FIFO method
a. Considers the stage of completion of beginning work in process inventory in computing equivalent
units of production, but the average method does not
b. Does not consider the stage of completion of beginning work in process inventory in computing
equivalent units of production, but the average method does
c. Is applicable only to those companies using the FIFO inventory pricing method, but the average
method may be used with any inventory pricing method
d. Allocates costs based on whole units, but the average method uses equivalent units
4. The average and FIFO process costing methods differ in that the average method:
a. Can be used under any cost flow assumption
b. Is much more difficult to apply than the FIFO method
c. Requires that ending work in process inventory be stated in terms of equivalent units of production
d. Does not consider the degree of completion of beginning work in process inventory when
computing equivalent units of production
5. Current period’s cost per equivalent unit under FIFO process costing considers current period costs
a. Only c. Less cost of beginning WIP
b. Plus cost of beginning WIP d. Plus cost of ending WIP
7. In a process costing system using the weighted average method, cost per equivalent unit for a given cost
component is found by dividing which of the following by EUP?
a. Only current period cost
b. Current period cost plus the cost of beginning inventory
c. Current period cost less the cost of beginning inventory
ct
8. In a cost of production report using process costing, transferred-in costs are similar to the
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9. A continuous loss
a. Occurs unevenly throughout a process
b. Never occurs during the production process
c. Always occurs at the same place in a production process
d. Occurs evenly throughout the production process
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11. The cost of normal discrete losses is
a. Absorbed by all units past the inspection point on an equivalent unit basis
b. Absorbed by all units in ending inventory
c. Considered a period cost
d. Written off as a loss on an equivalent unit basis
14. If normal spoilage is detected at an inspection point within the process (rather than at the end), the cost of
that spoilage should be
a. Included with the cost of the units sold during the period
b. Included with the cost of the units completed in that department during the period
c. Allocated to ending work in process units and units transferred out based on their relative
values
d. Allocated to the good units that have passed the inspection point
PROBLEMS
Current Costs:
Material P120,000
Conversion 350,000
All materials are added at the start of production and the inspection point is at the end of the process.
ct
Question 1: What are equivalent units of production for material using FIFO?
a. 80,000 c. 78,900
b. 79,100 d. 87,500
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Question 2: What are equivalent units of production for conversion costs using FIFO?
a. 79,700 c. 81,100
b. 79500 d. 80,600
Question 3: What are equivalent units of production for material using weighted average?
a. 86,600 c. 86,400
b. 87,500 d. 85,500
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Question 4: What are equivalent units of production for conversion costs using weighted average?
a. 83,600 c. 82,500
b. 82,700 d. 81,600
Question 5: What is cost per equivalent unit for material using FIFO?
a. P1.63 c. P1.50
b. P1.37 d. P1.56
Question 6: What is cost per equivalent unit for conversion costs using FIFO?
a. P4.000 c. P4.34
b. P4.19 d. P4.38
Question 7: What is cost per equivalent unit for material using weighted average?
a. P1.49 c. P1.56
b. P1.63 d. P1.44
Question 8: What is cost per equivalent unit for conversion costs using weighted average?
a. P4.19 c. P4.55
b. P4.41 d. P4.35
Question 10: What is the cost assigned to abnormal spoilage using FIFO?
a. P1,350 c. P5,256
b. P3,906 d. P6,424
Question 11: What is the cost assigned to normal spoilage and how is it classified using weighted average?
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a. P6,193 allocated between WIP and Transferred Out
b. P6,424 allocated between WIP and Transferred Out
c. P6,193 assigned to loss account
d. P6,424 assigned to units Transferred Out
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Question 12: What is the total cost assigned to goods transferred out using weighted average?
a. P435,080 c. P428,656
b. P429,824 d. P423,400
ct
2. The following information is available for Jorralyn Company for the current year:
Beginning Work in Process Costs of Beginning Work in Process:
(75% complete) 14,500 units Material P25,100
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Question 1: Using weighted average, what are equivalent units for material?
a. 82,000 c. 84,500
b. 89,500 d. 70,000
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Question 2: Using weighted average, what are equivalent units for conversion costs?
a. 80,600 c. 83,100
b. 78,100 d. 75,600
Question 3: What is the cost per equivalent unit for material using weighted average?
a. P1.72 c. P1.77
b. P1.62 d. P2.07
Question 4: What is the cost per equivalent unit for conversion costs using weighted average?
a. P4.62 c. P4.48
b. P4.21 d. 4.34
Question 6: Using FIFO, what are equivalent units for conversion costs?
a. P72,225 c. P69,725
b. P67,225 d. P78,100
Question 7: Using FIFO, what is the cost per equivalent unit for material?
a. P1.42 c. P1.71
b. P1.66 d. P1.60
Question 8: Using FIFO, what is the cost per equivalent unit for conversion costs?
a. P4.46 c. P4.30
b. P4.15 d. P3.84
3. Irish Company employs process cost system. A unit of product passes through two departments: Assembly
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and Finishing before it is complete. Information regarding Assembly Department follow:
Raw materials are added at the beginning of processing in the Assembly department without changing the
number of units being processed. Work in Process on August 1 was 90% complete as to conversion while
80% converted on August 31. In the Assembly Department, inspection takes place when the units are 75%
converted. The company usually experienced a 5% loss based on the completed units. Cost data for the
ct
Total cost of units transferred-out and total cost of work in process, end
a. P331,200; P37,376 c. P331,200; P36,000
b. P343,684; P37,376 d. P343,684; P36,000
- - End - -
This document is strictly private and confidential and should not be shared or distributed to a third party. Any violation gives Pinnacle the right to seek legal recourse.
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