PROBLEMSETC

PROBLEM201C
TheABCCompanymanufactureswidgetsandaccountsforproductcostsusingprocesscosting.
ThefollowinginformationisavailableregardingitsDecemberinventories:
Beginning
Ending
Inventory
Inventory
Rawmaterialsinventory$30,000$40,000
Goodsinprocessinventory170,000150,000
Finishedgoodsinventory
220,000180,000
The following additional information describes the companys manufacturing activities for
December:
Rawmaterialspurchases(paidoncredit)$200,000
Factorypayrollcost(paidincash)
1,000,000
Otheroverheadcosts(Otheraccountscredited)70,000
Materialsused
Direct
$240,000
Indirect
90,000
Laborused
Direct
$500,000
Indirect
500,000
Overheadrateasapercentofdirectlabor120%
Sales(oncredit)
$3,000,000
Required
1.Compute(a)thecostofproductstransferredfromproductiontofinishedgoods,and(b)goods
sold.
2.Prepare summary journal entries dated December 31 to record the following production
activitiesduringDecember:(a)rawmaterialspurchases,(b)directmaterialsusage,(c)indirect
materials usage, (d) payroll costs, (e) direct labor costs, (f) indirect labor costs, (g) other
overheadcosts,(h)overheadapplied,(i)goodstransferredfromproductiontofinishedgoods,
and(j)saleoffinishedgoods.
PROBLEM202C
SVCCompanyusesweightedaverageprocesscosting.Directlaborisaddedevenlythroughout
theprocess.Directmaterialsareaddedatthebeginningoftheprocess.DuringNovember,SVC
transferred330,000unitsofproducttofinishedgoods.AttheendofNovember,thegoodsin
process inventory consists of 100,000 units that are 70% complete with respect to labor.
Beginninginventoryhad$282,000ofdirectmaterialsand$405,600ofdirectlaborcost. The

direct labor cost added in November is $1,230,000, and its direct materials cost added is
$842,000.
Required
1.Determinetheequivalentunitsofproductionwithrespectto(a)directlaborand(b)direct
materials.
2.Computeboththedirectlaborcostandthedirectmaterialscostperequivalentunit
3.Computebothdirectlaborcostanddirectmaterialscostassignedtothe(a)unitsstartedand
completed,and(b)endinggoodsinprocessinventory
AnalysisComponent
4.SVCsellsandshipsallunitstocustomersassoonastheyarecompleted.Assumethatanerror
ismadeindeterminingthepercentageofcompletionforunitsinendinginventory.Insteadof
being70%completewithrespecttolabor,theyareactually90%complete.Writeaonepage
memototheplantmanagerdescribinghowthiserroraffectsitsNovemberfinancialstatements.
PROBLEM203C
HiskerCompanyproduceslargequantitiesofastandardizedproduct.Thefollowinginformation
isavailableforitsproductionactivitiesforMay:
Rawmaterials
Beginninginventory
$22,000
Rawmaterialspurchased(oncredit)
165,000
Directmaterialsused
(135,000)
Indirectmaterialsused
(42,000)
Endinginventory
$10,000
Factorypayroll
Directlaborused
Indirectlaborused
Totalpayrollcost(paidincash)

$199,090
62,000

$261,090

Factoryoverheadincurred
Indirectmaterialsused
Indirectlaborused
Otheroverheadcosts
Totalfactoryoverheadincurred

$42,000
62,000
73,290

$177,290

Factoryoverheadapplied
(100%ofdirectlaborcost)
Totalfactoryoverheadapplied

$199,090

Additionalinformationaboutunitsandcostsofproductionactivitiesfollows.
Units
Costs

Beginninginprocessinventory 2,500
Beginninginprocessinventory
Started
11,000
Directmaterials$10,000
Endinginprocessinventory
3,000Directlabor2,000
EndinginprocessinventoryFactoryoverhead2,000
Materialspercentcomplete
100%Directmaterialsadded 80,045
Laborandoverheadpercentcomplete30%Directlaboradded
66,058
Overheadapplied(100%of
directlabor)
66,058

Totalcosts
$226,161
Endinginprocessinventory$47,900
During May, 8,500 units of finished goods are sold for $105 cash each. Cost information
regardingfinishedgoodsfollows.
Beginningfinishedgoodsinventory
$144,000
Costtransferredin
810,000
Costofgoodssold(670,000)
Endingfinishedgoodsinventory
$284,000
Required
1.PreparejournalentriestorecordthefollowingMayactivities:(a)rawmaterialspurchases,(b)
directmaterialsusage,(c)indirectmaterialsusage,(d) factorypayrollcosts,(e)directlabor
costs used in production, (f) indirect labor costs, (g) other overhead costs credit Other
accounts,(h)overheadapplied,(i)goodstransferredtofinishedgoods,(j)saleoffinishedgoods.
2.Prepareaprocesscostsummaryreportforthiscompany,showingcostschargedtoproduction,
unitscostinformation,equivalentunitsofproduction,costperEUP,anditscostassignmentand
reconciliation.
AnalysisComponent
4.Hiskerprovidesincentivestoitsdepartmentmanagersbypayingmonthlybonusesbasedon
theirsuccessincontrollingcostsperequivalentunitofproduction.Assumethattheproduction
departmentunderestimatesthepercentageofcompletionforunitsinendinginventorywiththe
resultthatitsequivalentunitsofproductioninendinginventoryforMayareunderstated.What
impactdoesthiserrorhaveontheMaybonusespaidtotheproductionmanagers?Whatimpact,
ifany,doesthiserrorhaveonJunebonuses?
PROBLEM204C
GQCompanyproducesitsproductinasingleprocessingdepartment.Directmaterialsareadded
atthestartoftheprocess,whiledirectlabor,andoverheadareaddedevenlythroughoutthe
process. The company uses monthly reporting periods for its weightedaverage process cost

accounting system. Its Goods in Process Inventory account follows after entries for direct
materials,directlabor,andoverheadcostsforNovember:
GoodsinProcessInventory
Acct.No.155
DateExplanation
DebitCreditBalance
Nov.1 Beg.Balance
40,782
31 Directmaterials
10,200
50,982
31 Directlabor
40,40091,382
31 Appliedoverhead
123,000214,382
Itsbeginninggoodsinprocessconsistedof$2,380ofdirectmaterials,$9,538ofdirectlabor,and
$28,864offactoryoverhead.DuringNovember,thecompanystarted6,000unitsandtransferred
7,500unitstofinishedgoods.Attheendofthemonth,thegoodsinprocessinventoryconsisted
of1,000unitsthatwere70%complete.
Required
1.Prepare the companys process cost summary for November using the weighted average
method.
2.PreparethejournalentrydatedNovember30totransferthecostofthecompletedunitsto
finishedgoodsinventory.
PROBLEM205C
RastaPastaCompanyproducesasingletypeofdreadlockedshapednoodleinonedepartment.
Alldirectmaterialsareaddedatthebeginningofthemanufacturingprocess.Directlaborand
overheadareaddedevenlythroughouttheprocess.RastaPastausesmonthlyreportingperiods
foritsweightedaverageprocesscostaccountingsystem.DuringApril,thecompanycompleted
andtransferred32,000unitsofproducttofinishedgoodsinventory.Its5,000unitsofbeginning
goodsinprocessinventoryconsistedof$34,370ofdirectmaterials,$126,520ofdirectlabor,and
$60,856offactoryoverhead.Ithas3,500units(100%completewithrespecttodirectmaterials
and80%completewithrespecttodirectlaborandoverhead)inprocessattheendofthemonth.
Afterentries torecord direct materials, direct labor, andoverhead forApril,the companys
GoodsinProcessInventoryaccountfollows.
GoodsinProcessInventory Acct.No.135
DebitCreditBalance
221,746
567,000788,746
2,087,0002,875,746
1,001,0003,876,746

Date
Explanation
April 1 Balance
30 Directmaterials
30 Directlabor
30 Appliedoverhead
Required
1.PreparethedepartmentsprocesscostsummaryforApril.
2.Preparethejournalentrytotransferthecostofcompletedunitstofinishedgoodsinventory.

AnalysisComponents
3.Thecostaccountingprocessdependsonnumerousestimates.
a. Identifytwomajorestimatesthatdeterminethecostperequivalentunit.
b. Inwhatdirectionmightyouanticipateabiasfrommanagementforeachestimateinpart
3(a) (assume that management compensation is based on maintaining low inventory
amounts)?Explainyouranswer.