# Managerial Accounting: Ch.4 Process Costing

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Quality Brick Company produces bricks in two processing departments—Molding and Firing. Information relating to the company’s operations in March follows:

1. Raw materials used in production: Molding Department, $26,000; and Firing Department,$5,500.
2. Direct labor costs incurred: Molding Department, $16,200; and Firing Department,$4,800.
3. Manufacturing overhead was applied: Molding Department, $22,700; and Firing Department,$35,600.
4. Unfired, molded bricks were transferred from the Molding Department to the Firing Department. According to the company’s process costing system, the cost of the unfired, molded bricks was $65,400. 5. Finished bricks were transferred from the Firing Department to the finished goods warehouse. According to the company’s process costing system, the cost of the finished bricks was$108,700.
6. Finished bricks were sold to customers. According to the company’s process costing system, the cost of the finished bricks sold was \$105,400.

Required:

Prepare journal entries to record items (a) through (f) above. (If no entry is required for a transaction/event, select “No journal entry required” in the first account field.)

No Transaction General Journal Debit Credit
1 a. Work in process—Molding Departmentselected 26,000
Work in process—Firing Department 5,500
Raw materials 31,500

2 b. Work in process—Molding Department 16,200
Work in process—Firing Department 4,800
Salaries and wages payable 21,000

3 c. Work in process—Molding Department 22,700
Work in process—Firing Department 35,600

4 d. Work in process—Firing Department 65,400
Work in process—Molding Department 65,400

5 e. Finished goods 108,700
Work in process—Firing Department 108,700

6 f. Cost of goods sold 105,400
Finished goods 105,400
Clonex Labs, Inc., uses the weighted-average method in its process costing system. The following data are available for one department for October:

Percent Completed
Units Materials Conversion
Work in process, October 1 48,000 95 % 55 %
Work in process, October 31 39,000 67 % 53 %

The department started 406,000 units into production during the month and transferred 415,000 completed units to the next department.

Required:

Compute the equivalent units of production for October.

Solution

Materials Conversion
Equivalent units of production 441,130 435,670
Explanation
Weighted-Average Method
Equivalent Units of Production
Materials Conversion
Units transferred out 415,000 415,000
Equivalent units in ending work in process inventory:
39,000 units × 67% 26,130
39,000 units × 53% 20,670
Equivalent units of production 441,130 435,670
Superior Micro Products uses the weighted-average method in its process costing system. Data for the Assembly Department for May appear below:

Work in process, May 1 24,700 39,900 194,085
Cost added during May 149,915 26,600 129,390
Equivalent units of production 2,100 2,000 1,900

Required:

Compute the cost per equivalent unit for materials, labor, overhead, and in total. (Round your answers to 2 decimal places.)

Solution

Cost per equivalent unit 83.15 33.25 170.25 286.65
Explanation
Weighted-Average Method
Cost of beginning work in process inventory 24,700 39,900 194,085
Cost added during the period 149,915 26,600 129,390
Total cost (a) 174,615 66,500 323,475
Equivalent units of production (b) 2,100 2,000 1,900
Cost per equivalent unit (a) ÷ (b) 83.15 33.25 170.25
Total
Materials 83.15
Labor 33.25
Total cost per equivalent unit 286.65
Data concerning a recent period’s activity in the Prep Department, the first processing department in a company that uses process costing, appear below:

Materials Conversion
Equivalent units in ending work in process inventory 2,120 980
Cost per equivalent unit 14.56 5.13

A total of 21,100 units were completed and transferred to the next processing department during the period.

Required:

1. Compute the cost of ending work in process inventory for materials, conversion, and in total.
2. Compute the cost of the units completed and transferred out for materials, conversion, and in total.
(For all requirements, round your final answers to the nearest whole dollar amount.)

Solution

Materials Conversion Total
1. Cost of ending work in process inventory 30,867 5,027 35,894
2. Cost of units transferred out 307,216 108,243 415,459
Explanation

1.

Materials Conversion Total
Ending work in process inventory:
Equivalent units 2,120 980
Cost per equivalent unit 14.56 5.13
Cost of ending work in process inventory 30,867 5,027 35,894
2.

Materials Conversion Total
Units completed and transferred out:
Units transferred to the next department 21,100 21,100
Cost per equivalent unit 14.56 5.13
Cost of units transferred out 307,216 108,243 415,459
Helix Corporation uses the weighted-average method in its process costing system. It produces prefabricated flooring 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 May for the first production department follow:

Percent Complete
Units Materials Conversion
Work in process inventory, May 1 79,000 100 % 50 %
Work in process inventory, May 31 59,000 100 % 30 %
Materials cost in work in process inventory, May 1 61,800
Conversion cost in work in process inventory, May 1 18,400
Units started into production 253,600
Units transferred to the next production department 273,600
Materials cost added during May 104,500
Conversion cost added during May 264,161

Required:

1. Calculate the first production department’s equivalent units of production for materials and conversion for May.
2. Compute the first production department’s cost per equivalent unit for materials and conversion for May.
3. Compute the first production department’s cost of ending work in process inventory for materials, conversion, and in total for May.
4. Compute the first production department’s cost of the units transferred to the next production department for materials, conversion, and in total for May.

Solution

1. Calculate the first production department’s equivalent units of production for materials and conversion for May.
Materials Conversion
Equivalent units of production 332,600 291,300

Explanation

Weighted-Average Method

Materials Conversion
Units transferred to the next production department 273,600 273,600
Equivalent units in ending work in process inventory:
Materials: 59,000 units × 100% complete 59,000
Conversion: 59,000 units × 30% complete 17,700
Equivalent units of production 332,600 291,300
2. Compute the first production department’s cost per equivalent unit for materials and conversion for May. (Round your answers to 2 decimal places.)
Materials Conversion
Cost per equivalent unit 0.50 0.97

Explanation

Materials Conversion
Cost of beginning work in process 61,800 18,400
Cost added during the period 104,500 264,161
Total cost (a) 166,300 282,561
Equivalent units of production (b) 332,600 291,300
Cost per equivalent unit (a) ÷ (b) 0.50 0.97
3. Compute the first production department’s cost of ending work in process inventory for materials, conversion, and in total for May. (Round your intermediate calculations to 2 decimal places.)
Materials Conversion Total
Cost of ending work in process inventory 29,500 17,169 46,669
4. Compute the first production department’s cost of the units transferred to the next production department for materials, conversion, and in total for May.(Round your intermediate calculations to 2 decimal places.)
Materials Conversion Total
Cost of ending work in process inventory 136,800 265,392 402,192

Explanation for 3 & 4

Materials Conversion Total
Ending work in process inventory:
Equivalent units (see above) 59,000 17,700
Cost per equivalent unit (see above) 0.50 0.97
Cost of ending work in process inventory 29,500 17,169 46,669

Units completed and transferred out:
Units transferred to the next department 273,600 273,600
Cost per equivalent unit (see above) 0.50 0.97
Cost of units completed and transferred out 136,800 265,392 402,192
Pureform, 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:

Work in process inventory, beginning 81,000 77,300 39,500 52,600
Units started in process 774,000
Units transferred out 830,000
Work in process inventory, ending 25,000
Cost added during the month 1,022,825 486,550 648,800

The beginning work in process inventory was 85% complete with respect to materials and 70% complete with respect to labor and overhead. The ending work in process inventory was 65% 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. (Round your answers to 2 decimal places.)

Solution

1. Equivalent units of production 846,250 835,000 835,000
2. Cost per equivalent unit 1.30 0.63 0.84

Explanation

Weighted-Average Method

1.

Units transferred to the next department 830,000 830,000 830,000
Equivalent units in ending work in process inventory:
Materials:
25,000 units × 65% complete 16,250
25,000 units × 20% complete 5,000 5,000
Equivalent units of production 846,250 835,000 835,000
2.

Cost of beginning work in process 77,300 39,500 52,600
Cost added during the period 1,022,825 486,550 648,800
Total cost (a) 1,100,125 526,050 701,400
Equivalent units of production (b) 846,250 835,000 835,000
Cost per equivalent unit (a) ÷ (b) 1.30 0.63 0.84
Alaskan Fisheries, Inc., processes salmon for various distributors and it uses the weighted-average method in its process costing system. The company has two processing departments—Cleaning and Packing. Data relating to pounds of salmon processed in the Cleaning Department during July are presented below:

Percent Completed
Pounds of Salmon Materials Labor and Overhead
Work in process inventory, July 1 27,000 100 % 51 %
Work in process inventory, July 31 20,000 100 % 80 %

A total of 500,000 pounds of salmon were started into processing during July. All materials are added at the beginning of processing in the Cleaning Department.

Required:

Compute the Cleaning Department’s equivalent units of production for materials and for labor and overhead in the month of July.

Solution