ACC 123 PROCESS COSTING HANDOUT

WITH NORMAL AND ABNORMAL LOSS

COST OF PRODUCTION REPORT (WITH NORMAL LOST UNITS) FIFO COSTING AND AVERAGE
COSTING:

PROBLEM 1:

LACSON CORPORATION. uses three departments to produce a hair tonic. The

Finishing department is the third and last step before the product is
transferred to finished goods storage.

All materials needed to give the hair tonic its final composition are added at
the beginning of the process in the Finishing department. Quality control
inspection is done at the end of the process in this department, and lost units,
if any, are discovered only at this point.

The following data for the Finishing department for May 2024 have been made
available.

Quantity Data:
In process, May 1 (labor and overhead, ¾ complete) 10,000 units
Received from the preceding department 40,000 units
Finished and transferred to storage 35,000 units
In process, May 31 (labor and overhead, ½ complete) 10,000 units

Cost Data:
Inventory work-in-process – May 1:
Cost from preceding department P38,000
Cost from this department:
Materials P21,500
Labor P39,000
Overhead P42,000
Total Inventory work-in process, May 1 P140,500

Received from the preceding department during May P140,000

Costs added in this department this month:
Materials P70,000
Labor P162,500
Overhead P130,000 P362,500
TOTAL COST TO BE ACCOUNTED FOR P643,000

Required: Prepare a Cost of Production Report for May, 2024 using:

(a) FIFO Costing, and
(b) AVERAGE Costing.
ACC 123 PROCESS COSTING HANDOUT
WITH NORMAL AND ABNORMAL LOSS

COST OF PRODUCTION REPORT WITH NORMAL AND ABNORMAL LOST UNITS FIFO COSTING
PROBLEM 2: FIFO COSTING

NOVAL MANUFACTURERS, Inc. uses process costing in its manufacturing operations.

In Dept 2, conversion costs are incurred uniformly throughout the process.
Materials are added following inspection, which occurs at the 90% stage of
completion. Normal spoilage is expected to be 5% of good output.
The following information relates to Department 2 for June, 2024.
Units Pesos
Received from Department 1 12,000 P84,000
Transferred to finished product 9,000
Ending inventory (70% complete) 2,000

Costs incurred during the current month:

Materials P18,000
Labor and overhead P45,200

Required: Prepare a Cost of Production Report for Dept 2 for June, 2024.