Advanced Financial Accounting and Reporting

Cost Accounting — Process Costing

May 14, 2019

Problem I

The Eddezon Company manufactures a standard recliner. During February, the firm’s Assembly Department started production of
75,000 chairs. During the month, the firm completed 80,000 chairs, and transferred them to the Finishing Department. The firm
ended the month with 10,000 chairs in ending inventory. There were 15,000 chairs in beginning inventory. All direct material costs
are added at the beginning of the production cycle and conversion costs are added uniformly throughout the production process.
The FIFO method of process costing is used by Eddezon company. Beginning work in process was 30% complete as to conversion
costs, while ending work in process was 80% complete as to conversion costs.

Beginning inventory:
Direct materials P24,000
Conversion costs 35,000

Manufacturing costs added

during the accounting period:
Direct materials 168,000
Conversion costs 278,000

1. What were the equivalent units for conversion costs during February?
2. What is the amount of direct materials cost assigned to ending work in process inventory at the end of February?
3. What is the cost of the goods transferred out during February?

Problem II

The Beverly Company manufactures clocks on a highly automated assembly line. Its costing system uses two cost categories, direct
materials and conversion costs. Each product must pass through the Assembly Department and the Testing Department. Direct
materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production.
Beverly uses weighted-average costing.

Data for the Assembly Department for June 2019 are:

Work in progress, beginning inventory 250 units
Direct materials (100% complete)
Conversion costs (50% complete)

Units started during June 800 units

Work in process, ending inventory 150 units
Direct materials (100% complete)
Conversion costs (75% complete)

Costs for June 2019:

Work in progress, beginning inventory:
Direct materials P90,000
Conversion costs 135,000
Direct materials costs added during June 500,000
Conversion costs added during June 500,000

1. What is the direct materials cost per equivalent unit during June?
2. What is the conversion cost per equivalent unit in June?
3. What amount of direct materials costs is assigned to the ending work in process account for June?
4. What amount of conversion costs are assigned to the ending work in process account for June?
Advanced Financial Accounting and Reporting
Cost Accounting — Process Costing
May 14, 2019

Problem III

Jeraldine Company applies process costing in the manufacture of its sole product.
 Manufacturing starts in Department 1 where materials are all added at the start of processing. The good units are then
transferred to Department 2 where all the incremental materials needed for its completion are added after final inspection.
 In Department 1, units are inspected at the end of processing while in Department 2, inspection takes place when the units
are 90% completed.
 Department 1 uses FIFO costing while Department 2 uses the weighted-average costing.

The production data for the month of August show the following:

Department 1 Department 2
Units
Beginning work in process 20,000 10,000
Work to be done 80% 20%
Ending work in process, August 31 30,000 17,500
Work completed 2/3 5/7
Started in process during August 150,000 ?
Normal spoilage (4% of units
started in process) 2,500
Abnormal spoilage (1/4 of normal spoilage) 1,250

Cost
Work in process, August 1
Transferred in - P 285,450
Materials P 135,000 214,875
Conversion costs 97,500 280,725
Current costs:
Transferred in - ?
Materials 1,980,000 840,000
Conversion costs 3,088,800 1,282,500

Compute for the following:

1. Total costs transferred to Department 2

2. Work in process, end in Department 1
3. Total costs transferred to the Storeroom
4. Work in process, end in Department 2