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    CHAPTER 17

    PROCESS-COSTING

    17-1 Industries using process costing in their manufacturing area include chemical processing,oil refining, pharmaceutical, plastics, brick and tile manufacturing, semiconductor chips, beverages,and breakfast cereals.

    17-2 Process costing systems separate costs into cost categories according to the timing ofwhen costs are introduced into the process. Often, only two cost classifications, direct materialsand conversion costs, are necessary. Direct materials are frequently added at one point in time,often the start or the end of the process, and all conversion costs are added at about the same time,but in a pattern different from direct materials costs.

    17-3 Equivalent units is a derived amount of output units that takes the quantity of each inputfactor of production! in units completed or in incomplete units in work in process, and converts thequantity of input into the amount of completed output units that could be made with that quantity ofinput. Each equivalent unit is comprised of the physical quantities of direct materials or conversion

    costs inputs necessary to produce output of one fully completed unit. Equivalent unit measures arenecessary since all physical units are not completed to the same e"tent.

    17-4 #he accuracy of the estimates of completion depend on the care and skill of the estimatorand the nature of the process. $ircraft blades may differ substantially in the finishing necessary toobtain a final product. #he amount of work necessary to finish a product may not always be easy toascertain in advance.

    17-5 #he five key steps in process costing follow%&tep '% &ummari(e the flow of physical units of output.&tep )% *ompute output in terms of equivalent units.

    &tep +% *ompute equivalent unit costs.&tep % &ummari(e total costs to account for.&tep -% $ssign total costs to units completed and to units in ending work in process.

    17-6 #hree inventory methods associated with process costing are% /eighted average. 0irst1in, first1out. &tandard costing.

    17-7 #he weighted1average process1costing method calculates the equivalent1unit cost of all thework done to date regardless of the accounting period in which it was done!, assigns this cost to

    equivalent units completed and transferred out of the process, and to equivalent units in endingwork1in1process inventory.

    17-1

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    17-8 0I0O computations are distinctive because they assign the cost of the previous accountingperiod2s equivalent units in beginning work1in1process inventory to the first units completed andtransferred out of the process and assigns the cost of equivalent units worked on during the currentperiod first to complete beginning inventory, ne"t to start and complete new units, and finally tounits in ending work1in1process inventory. In contrast, the weighted1average method costs unitscompleted and transferred out and in ending work in process at the same average cost.

    17-9 0I0O should be called a modified or departmental 0I0O method because the goodstransferred in during a given period usually bear a single average unit cost as a matter ofconvenience.

    17-10 $ ma3or advantage of 0I0O is that managers can 3udge the performance in the currentperiod independently from the performance in thepreceding period.

    17-11 #he 3ournal entries in process costing are basically similar to those made in 3ob1costingsystems. #he main difference is that, in process costing, there is often more than one work1in1process account44one for each process.

    17-12 &tandard1cost procedures are particularly appropriate to process1costing systems wherethere are various combinations of materials and operations used to make a wide variety of similarproducts as in the te"tiles, paints, and ceramics industries. &tandard1cost procedures also avoid theintricacies involved in detailed tracking with weighted1average or 0I0O methods when there arefrequent price variations over time.

    17-13 #here are two reasons why the accountant should distinguish between transferred-in costsand additional direct materials costsfor a particular department%

    a! $ll direct materials may not be added at the beginning of the department process.b! #he control methods and responsibilities may be different for transferred1in items and

    materials added in this department.

    17-14 5o. #ransferred1in costs or previous department costs are costs incurred in a previousdepartment that have been charged to a subsequent department. #hese costs may be costs incurredin that previous department during this accounting period or a preceding accounting period.

    17-15 6aterials are only one cost item. Other items often included in a conversion costs pool!include labor, energy, and maintenance. If the costs of these items vary over time, this variabilitycan cause a difference in cost of goods sold and inventory amounts when the weighted1average or0I0O methods are used.

    $ second factor is the amount of inventory on hand at the beginning or end of anaccounting period. #he smaller the amount of production held in beginning or ending inventory

    relative to the total number of units transferred out, the smaller the effect on operating income, costof goods sold, or inventory amounts from the use of weighted1average or 0I0O methods.

    17-16 )- min.! Equivale! ui!"# $e%& 'e(ii( ive!&%)*'. Direct materials cost per unit 78)9,999 : '9,999! 7 8)

    *onversion cost per unit 78;9,999 : '9,999! 8;$ssembly Department cost per unit 7'anuary. In >anuary, all '9,999 units introduced are fullycompleted resulting in '9,999 equivalent units of work done with respect to direct materials andconversion costs. In 0ebruary, of the '9,999 units introduced, '9,999 equivalent units of work isdone with respect to direct materials but only ?,-99 equivalent units of work is done with respect toconversion costs. #he $ssembly Department cost per unit is, therefore, higher.

    SO+,TION EHI.IT 17-16A

    &teps ' and )% &ummari(e Output in Physical @nits and *ompute Equivalent @nits

    $ssembly Department of International Electronics for 0ebruary )99

    /S!e 2

    /S!e 1 Equivale! ,i!"

    P)"ial i%e! C&ve%"i&

    l& & P%&u!i& ,i!" a!e%ial" C&"!"

    /ork in process, beginning 9&tarted during current period '9,999#o account for '9,999*ompleted and transferred out during current period ?,999 ?,999 ?,999/ork in process, endingA ',999

    ',999 '99BC ',999 -9B ',999 -99

    $ccounted for '9,999/ork done in current period only '9,999 ?,-99

    ADegree of completion in this department% direct materials, '99BC conversion costs, -9B.

    SO+,TION EHI.IT 17-16.

    *ompute Equivalent @nit *osts,$ssembly Department of International Electronics for 0ebruary )99

    T&!al

    P%&u!i&C&"!"

    i%e!a!e%ial"

    C&ve%"i&C&"!"

    S!e 3!*osts added during 0ebruary 7',

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    17-17 )9 min.! :&u%al e!%ie" /&!iua!i& & 17-16*

    '. /ork in Process44$ssembly 8)9,999$ccounts Payable 8)9,999

    #o record 78)9,999 of direct materialspurchased and used in production during

    0ebruary )99

    ). /ork in Process44$ssembly 8;9,999arious accounts 8;9,999

    #o record 78;9,999 of conversion costsfor 0ebruary )99C e"amples include energy,manufacturing supplies, all manufacturinglabor, and plant depreciation

    +. /ork in Process44#esting ',+;e!

    =eginning inventory, 0eb. ' 9 +. #ransferred out to'. Direct materials 8)9,999 /ork in Process44#esting ',+;

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    17-18 )- min.! ?e%& 'e(ii( ive!&%)# >a!e%ial" i!%&ue i >ile &

    %&e""*

    '. &olution E"hibit '81'uly )99, and assigns these costs to units completed and transferred out! and to units in endingwork in process.

    SO+,TION EHI.IT 17-18A

    &teps ' and )% &ummari(e Output in Physical @nits and *ompute Equivalent @nits6i"ing Department of aasa *hemicals for >uly )99

    /S!e 1

    /S!e 2

    Equivale! ,i!"

    P)"ial C&ve%"i&

    l& & P%&u!i& ,i!" Ce>ial P Ce>ial @ C&"!"

    /ork in process, beginning 9&tarted during current period -9,999#o account for -9,999*ompleted and transferred out during current period +-,999 +-,999 +-,999 +-,999/ork in process, endingA '-,999

    '-,999 '99BC '-,999 9BC

    '-,999 ;; )G+B '-,999 9 '9,999

    $ccounted for -9,999/ork done in current period only -9,999 +-,999 -,999

    ADegree of completion in this department% *hemical P, '99BC *hemical F, 9BC conversion costs, ;; )G+B.

    17-5

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    17-18 *ont2d.!

    SO+,TION EHI.IT 17-18.

    &teps +, , and -% *ompute Equivalent @nit *osts, &ummari(e #otal *osts to $ccount 0or, and$ssign *osts to @nits *ompleted and to @nits in Ending /ork in Process, 6i"ing Department ofaasa *hemicals for >uly )99

    T&!al

    P%&u!i&

    C&"!" Ce>ial P Ce>ial @

    C&ve%"i&

    C&"!"

    S!e 3!*osts added during >uly 7--,999 7)-9,999 789,999 7'+-,999Divide by equivalent units of workdone in current period &olutionE"hibit '81l

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    17-19 '- min.! ;ei(!e-ave%a(e >e!equivale! ui!"*

    @nder the weighted1average method, equivalent units are calculated as the equivalent units ofwork done to date. &olution E"hibit '81'? shows equivalent units of work done to date for the&atellite $ssembly Division of $erospatiale for direct materials and conversion costs.

    SO+,TION EHI.IT 17-19

    &teps ' and )% &ummari(e Output in Physical @nits and *ompute Equivalent @nits/eighted1$verage 6ethod of Process *osting, &atellite $ssembly Division of $erospatiale for6ay )99

    /S!e 1 /S!e 2

    P)"ial Equivale! ,i!"

    ,i!" i%e! C&ve%"i&

    l& & P%&u!i& /(ive a!e%ial" C&"!"

    /ork in process beginning e! a""i(i( &"!"*

    '. K ). &olution E"hibit '81) calculates the cost per equivalent unit of work done to date fordirect materials and conversion costs, summari(es total costs to account for, and assigns these coststo units completed and transferred out and to units in ending work1in1process inventory.

    SO+,TION EHI.IT 17-24

    &teps +, , and -% *ompute Equivalent @nit *osts, &ummari(e #otal *osts to $ccount 0or, and$ssign *osts to @nits *ompleted and to @nits in Ending /ork in Process/eighted1$verage 6ethod of Process *osting, *hatham *ompany for >uly )99

    T&!al

    P%&u!i&

    C&"!"

    i%e!

    a!e%ial"

    C&ve%"i&

    C&"!"

    /S!e 3! /ork in process, beginning given! 7'+9,999 7 ;9,999 7 89,999*osts added in current period given! ;-',999 )

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    17-25 +9 min.! IO >e! a""i(i( &"!"*

    '. K ). &olution E"hibit '81)-$ calculates the equivalent units of work done in the current period.&olution E"hibit '81)-=, calculates the cost per equivalent unit of work done in the current periodfor direct materials and conversion costs, summari(es total costs to account for, and assigns thesecosts to units completed and transferred out and to units in ending work1in1process inventory.

    SO+,TION EHI.IT 17-25A&teps ' and )% &ummari(e Output in Physical @nits and *ompute Equivalent @nits0I0O 6ethod of Process *osting, *hatham *ompany for >uly )99

    /S!e 1

    /S!e 2

    Equivale! ,i!"

    l& & P%&u!i&

    P)"ial

    ,i!"

    i%e!

    a!e%ial"

    C&ve%"i&

    C&"!"

    /ork in process, beginning given!&tarted during current period given!#o account for

    '9,9999,999-9,999

    work done before current period!

    *ompleted and transferred out during current period%

    0rom beginning work in processJ

    '9,999 '99B '99B!C '9,999 '99B 4 89B!'9,999 9 +,999

    &tarted and completed ),999 '99B, ),999 '99B

    ),999

    ),999 ),999/ork in process, endingA given!

    ';,999 '99BC ';,999 -9B';,999

    ';,999

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    17-25 *ont2d.!

    SO+,TION EHI.IT 17-25.

    &teps +, , and -% *ompute Equivalent @nit *osts, &ummari(e #otal *osts to $ccount 0or, and$ssign *osts to @nits *ompleted and to @nits in Ending /ork in Process0I0O 6ethod of Process *osting, *hatham *ompany for >uly )99

    T&!al

    P%&u!i&

    C&"!"

    i%e!

    a!e%ial"

    C&ve%"i&

    C&"!"

    /ork in process, beginning 7;9,999 H 789,999! 7'+9,999 costs of work done beforecurrent period!

    S!e 3! *osts added in current period given! ;-',999 7)

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    17-26 +9 min.! S!aa%-&"!i( >e! a""i(i( &"!" Mefer to the informationin E"ercise '81)!.

    '. #he calculations of equivalent units for direct materials and conversion costs are identical tothe calculations of equivalent units under the 0I0O method. &olution E"hibit '81)-$ shows theequivalent unit calculations for standard costing given by the equivalent units of work done in >uly)99. &olution E"hibit '81); uses the standard costs direct materials, 7;.-9C conversion costs,7'9.+9! to summari(e total costs to account for, and to assign these costs to units completed andtransferred out and to units in ending work1in1process inventory.

    ). &olution E"hibit '81); shows the direct materials and conversion costs variances for

    Direct materials 7)9,999 @*onversion costs 7'9,-99 @

    SO+,TION EHI.IT 17-26

    &teps +, , and -% *ompute Equivalent @nit *osts, &ummari(e #otal *osts to $ccount 0or, and$ssign *osts to @nits *ompleted and to @nits in Ending /ork in Process

    @se of &tandard *osts in Process *osting, *hatham *ompany for >uly )99.T&!al

    P%&u!i&

    C&"!"

    i%e!

    a!e%ial"

    C&ve%"i&

    C&"!"

    /S!e 3! &tandard cost per equivalent unit given! 7 ; .-9 7 '9 .+9/ork in process, beginning given!

    Direct materials, '9,999 7;.-9C *onversion costs,

    8,999 7'9.+9 7'+8,'99

    *osts added in current period at standard costs

    Direct materials, 9,999 7;.-9C

    *onversion costs, +-,999 7'9.+9 ;)9,-99 );9,999 +;9,-99

    S!e 4 *osts to account for 78-8,;99

    /S!e 5! $ssignment of costs at standard costs%*ompleted and transferred out +,999 units!%

    /ork in process, beginning '9,999 units! Direct materials added in current period *onversion costs added in current period

    #otal from beginning inventory

    7'+8,'999

    +9,?99';

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    17-27 +-49 min.! T%a"e%%e-i &"!"# ei(!e-ave%a(e >e!&*

    '. K ). &olution E"hibit '81)8$ calculates the equivalent units of work done to date. &olutionE"hibit '81)8= calculates the cost per equivalent unit of work done to date for transferred1in costs,direct materials, and conversion costs, summari(es total costs to account for, and assigns these coststo units completed and transferred out and to units in ending work1in1process inventory.

    SO+,TION EHI.IT 17-27A&teps ' and )% &ummari(e Output in Physical @nits and *ompute Equivalent @nits/eighted1$verage 6ethod of Process *osting*ooking Department of Nideo *hemicals for >une )99

    /S!e 1 /S!e 2

    P)"ial Equivale! ,i!"

    l& & P%&u!i&

    ,i!"

    /(ive

    T%a"e%%e-

    i C&"!"

    i%e!

    a!e%ial"C&ve%"i&

    C&"!"

    /ork in process, beginning 9#ransferred in during current period

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    17-27 *ont2d.!

    SO+,TION EHI.IT 17-27.

    &teps +, , and -% *ompute Equivalent @nit *osts, &ummari(e #otal *osts to $ccount 0or, and$ssign *osts to @nits *ompleted and to @nits in Ending /ork in Process/eighted1$verage 6ethod of Process *osting*ooking Department of Nideo *hemicals for >une )99

    T&!al

    P%&u!i&

    C&"!"

    T%a"e%%e

    -i C&"!"

    i%e!

    a!e%ial"

    C&ve%"i&

    C&"!"

    S!e 3! /ork in process, beginning given! 7 -

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    17-28 *ont2d.!

    SO+,TION EHI.IT 17-28A

    &teps ' and )% &ummari(e Output in Physical @nits and *ompute Equivalent @nits0I0O 6ethod of Process *osting*ooking Department of Nideo *hemicals for >une )99

    /S!e 1

    /S!e 2

    Equivale! ,i!"

    l& & P%&u!i&

    P)"ial

    ,i!"

    T%a"e%%e-

    i C&"!"

    i%e!

    a!e%ial"

    C&ve%"i&

    C&"!"

    /ork in process, beginning given!#ransferred in during current period given!#o account for

    9

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    17-28*ont2d.!

    SO+,TIONEHI.IT 17-28.&teps +, , and -% *ompute Equivalent @nit *osts, &ummari(e #otal *osts to $ccount 0or,and $ssign *osts to @nits *ompleted and to @nits in Ending /ork in Process0I0O 6ethod of Process *osting*ooking Department of Nideo *hemicals for >une )99

    T&!alP%&u!i&

    C&"!"T%a"e%%e

    -i C&"!"i%e!

    a!e%ial"

    C&ve%"i&

    C&"!"

    /ork in process, beginning7+?,)99 H 79 H 7'

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    17*29 '- min.! Oe%a!i& &"!i( *hapter $ppendi"!.

    *osts of /ork Order #otal costs 7;-,999 7'

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    17-30*ont2d.!

    17-30 EBel Alia!i&Process Costing

    Global Defense, Inc.Original Data

    Physical Units Direct Conversion

    (Missiles) Materials CostsWork in process, October 1 20 $460,000 $120,000Started during October 2004 80

    Completed during October 2004 90Work in process, October 1 10

    Costs added during October 2004 $2,000,000 $9!,000

    Problem 1Direct Conversion

    lo! of Pro"#ction Physical Units Materials CostsWork in process, beginning 20Started during current period 80"o account #or 100

    ood units completed and trans#erred out during current period 90 90 90Work in process, ending 10 10 % 100&' 10 % (0& 10 (

    )ccounted #or 100

    Work done to date 100 9(

    Problem $%otal Direct Conversion

    Pro"#ction Materials CostsCosts

    Work in process, beginning $ !80,000 $ 460,000 $ 120,000Costs added in current period 2,9!,000 2,000,000 9!,000

    Costs incurred to date $2,460,000 $1,0!!,000*+uialent units o# -ork done

    to date 100 9(Cost per e+uialent unit o# -ork done to date $24,600 $10,8(6.29

    Problem &%otal

    Pro"#ction Direct ConversionCosts Materials Costs

    "otal costs to account #or $,!1!,000

    )ssignment o# costs/Completed and trans#erred out $,192,866 2,214,000 9(8,866Work in process, ending irect materials 246,000 Conersion costs (6,14"otal -ork in process ending 22,14"otal costs accounted #or $,!1!,000

    17-22

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    17-31 '9 min.! :&u%al e!%ie"/&!iua!i& & 17-30*

    '. /ork in Process44$ssembly Department ),999,999$ccounts Payable ),999,999

    Direct materials purchased and used in production in October.

    ). /ork in Process44$ssembly Department ?+-,999arious accounts ?+-,999

    *onversion costs incurred in October.

    +. /ork in Process44#esting Department +,'?),e!

    =eginning inventory, October ' -

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    17-32 *ont2d.!

    SO+,TION EHI.IT 17-32A

    &teps ' and )% &ummari(e Output in Physical @nits and *ompute Equivalent @nits0I0O 6ethod of Process *osting, $ssembly Department of Qlobal Defense Inc. for October )99

    /S!e 1

    /S!e 2

    Equivale! ,i!"

    l& & P%&u!i&

    P)"ial

    ,i!"

    i%e!

    a!e%ial"

    C&ve%"i&

    C&"!"

    /ork in process, beginning given!&tarted during current period given!#o account for

    )9

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    17-33*ont2d.!

    . >ournal entries%a. /ork in Process44#esting Department +,'?),

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    17-33 *ont2d.!

    SO+,TION EHI.IT 17-33.

    &teps +, , and -% *ompute Equivalent @nit *osts, &ummari(e #otal *osts to $ccount 0or, and$ssign *osts to @nits *ompleted and to @nits in Ending /ork in Process/eighted1$verage 6ethod of Process *osting#esting Department of Qlobal Defense Inc. for October )99

    T&!al

    P%&u!i&

    C&"!"

    T%a"e%%e

    -i C&"!"

    i%e!

    a!e%ial"

    C&ve%"i&

    C&"!"

    S!e 3! /ork in process, beginning given! 7',+'8,;99 7 ?e!& /&!iua!i& & 17-33*

    '. $s e"plained in Problem '81++, requirement ', transferred1in costs are '99B complete and

    direct materials are 9B complete in both beginning and ending work1in1process inventory.

    ). #he equivalent units of work done in October )99 in the #esting Department fortransferred1in costs, direct materials, and conversion costs are calculated in &olution E"hibit '81+$.

    +. &olution E"hibit '81+= calculates the cost per equivalent unit of work done in October)99 in the #esting Department for transferred1in costs, direct materials, and conversion costs,summari(es total #esting Department costs for October )99, and assigns these costs to unitscompleted and transferred out and to units in ending work in process using the 0I0O method.

    . >ournal entries%a. /ork in Process44#esting Department +,'

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    17-34*ont2d.!

    b. 0inished Qoods ?,)

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    17-34*ont2d.!

    SO+,TIONEHI.IT 17-34.&teps +, , and -% *ompute Equivalent @nit *osts, &ummari(e #otal *osts to $ccount 0or,and $ssign *osts to @nits *ompleted and to @nits in Ending /ork in Process0I0O 6ethod of Process *osting#esting Department of Qlobal Defense Inc. for October )99

    T&!alP%&u!i&

    C&"!"T%a"e%%e

    -i C&"!"i%e!

    a!e%ial"

    C&ve%"i&

    C&"!"

    /ork in process, beginning7++',

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    17-35 )- min.! ;ei(!e-ave%a(e >e!&*

    &olution E"hibit '81+-$ shows equivalent units of work done to date of

    Direct materials ),-99 equivalent units*onversion costs ),')- equivalent units

    5ote that direct materials are added when the 0orming Department process is '9B complete.=oth the beginning and ending work in process are more than '9B complete and hence are '99Bcomplete with respect to direct materials.

    &olution E"hibit '81+-= calculates cost per equivalent unit of work done to date for directmaterials and conversion costs, summari(es the total 0orming Department costs for $pril )99,and assigns these costs to units completed and transferred out!, and to units in ending work inprocess using the weighted1average method.

    SO+,TION EHI.IT 17-35A

    &teps ' and )% &ummari(e Output in Physical @nits and *ompute Equivalent @nits

    /eighted1$verage 6ethod of Process *osting, 0orming Department of &tar #oys for $pril )99

    /S!e 1 /S!e 2

    P)"ial Equivale! ,i!"

    ,i!" i%e! C&ve%"i&

    l& & P%&u!i& /(ive a!e%ial" C&"!"

    /ork in process, beginning +99&tarted during current period ),)99#o account for ),-99*ompleted and transferred out during current period ),999 ),999 ),999

    /ork in process, endingA -99 -99 '99BC -99 )-B -99 ')-

    $ccounted for ),-99/ork done to date ),-99 ),')-

    ADegree of completion in this department% direct materials, '99BC conversion costs, )-B.

    '81+'

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    17-35 *ont2d.!

    SO+,TION EHI.IT 17-35.

    &teps +, , and -% *ompute Equivalent @nit *osts, &ummari(e #otal *osts to $ccount 0or, and$ssign *osts to @nits *ompleted and to @nits in Ending /ork in Process/eighted1$verage 6ethod of Process *osting, 0orming Department of &tar #oys for $pril )99

    T&!al

    P%&u!i&

    C&"!"

    i%e!

    a!e%ial"

    C&ve%"i&

    C&"!"

    /S!e 3! /ork in process, beginning given! 7 ?,;)- 7 8,-99 7 ),')-*osts added in current period given! ''),-99 89,999 ),-99*osts incurred to date 788,-99 7,;)-Divide by equivalent units of work done to date &olution E"hibit '81+-$! ),-99 ),')-

    *ost per equivalent unit of work done to date 7 +' 7 )'S!e 4! #otal costs to account for 7')),')-S!e 5! $ssignment of costs%

    *ompleted and transferred out ),999 units! 7'9,999 ),999A7+' H ),999A 7)'

    /ork in process, ending -99 units!Direct materials '-,-99 -99 7+'*onversion costs #otal work in process, ending

    #otal costs accounted for

    ),;)- '

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    17-37 *ont2d.!

    SO+,TION EHI.IT 17-37A

    &teps ' and )% &ummari(e Output in Physical @nits and *ompute Equivalent @nits0I0O 6ethod of Process *osting, 0orming Department of &tar #oys for $pril )99

    /S!e 1

    /S!e 2

    Equivale! ,i!"

    l& & P%&u!i&P)"ial

    ,i!"i%e!

    a!e%ial"C&ve%"i&

    C&"!"

    /ork in process, beginning given!&tarted during current period given!#o account for

    +99),)99),-99

    work done before current period!

    *ompleted and transferred out during current period%0rom beginning work in processJ

    +99 '99B '99B!C +99 '99B 9B!

    +999 '

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    17-37 *ont2d.!

    SO+,TION EHI.IT 17-37.

    &teps +, , and -% *ompute Equivalent @nit *osts, &ummari(e #otal *osts to $ccount 0or, and$ssign *osts to @nits *ompleted and to @nits in Ending /ork in Process0I0O 6ethod of Process *osting, 0orming Department of &tar #oys for $pril )99

    T&!al

    P%&u!i&

    C&"!"

    i%e!

    a!e%ial"

    C&ve%"i&

    C&"!"

    /ork in process, beginninggiven% 78,-99 H 7),')-! 7 ?,;)- work done before current period!

    S!e 3! *osts added in current period given! ''),-99 789,999 7),-99Divide by equivalent units of work done in current period E"hibit '81+8$! ),)99 ),99-

    *ost per equivalent unit of work done in currentperiod 7+'.

    ')-L7)'.'?8

    AEquivalent units used to complete beginning work in process from &olution E"hibit '81+8$, &tep ).Equivelant units started and completed from &olution E"hibit '81+8$, &tep ).LEquivalent units in work in process, ending from &olution E"hibit '81+8$, &tep ).

    '81+-

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    17*38 +9 min.! T%a"e%%e-i &"!"# ei(!e ave%a(e/%ela!e !& 17-35 !%&u( 17-37*

    '. &olution E"hibit '81+

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    17-38 *ont2d.!

    SO+,TION EHI.IT 17-38.

    &teps +, , and -% *ompute Equivalent @nit *osts, &ummari(e #otal *osts to $ccount 0or, and$ssign *osts to @nits *ompleted and to @nits in Ending /ork in Process/eighted1$verage 6ethod of Process *osting0inishing Department of &tar #oys for $pril )99

    T&!al

    P%&u!i&

    C&"!"

    T%a"e%%e

    -i C&"!"

    i%e!

    a!e%ial"

    C&ve%"i&

    C&"!"

    S!e 3! /ork in process, beginning given! 7 )-,999 7 '8,8-9 7 9 7 8,)-9*osts added in current period given! ';-,-99 '9,999 )+,'99 +e!& /&!iua!i& & 17-38*

    '. &olution E"hibit '81+?$ calculates the equivalent units of work done in $pril )99 in the0inishing Department for transferred1in costs, direct materials, and conversion costs.

    &olution E"hibit '81+8= calculates the cost per equivalent unit of work done in $pril )99 inthe 0inishing Department for transferred1in costs, direct materials, and conversion costs,summari(es total 0inishing Department costs for $pril )99, and assigns these costs to unitscompleted and transferred out and to units in ending work in process using the 0I0O method.

    >ournal entries%a. /ork in Process440inishing Department '9+,-;;

    /ork in Process440orming Department '9+,-;;*ost of goods completed and transferred out during $pril from the 0orming Dept. to the 0inishing Dept.

    '81+8

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    17-39*ont2d.!

    b. 0inished Qoods ';;,8)+ /ork in Process440inishing Department ';;,8)+*ost of goods completed and transferred out

    during $pril from the 0inishing Department

    to 0inished Qoods inventory.

    ). #he equivalent units of work done in beginning inventory is% #ransferred1in costs, -99

    '99B -99C direct materials, -99 9B 9C and conversion costs, -99 ;9B +99. #he cost per

    equivalent unit of beginning inventory and of work done in the current period are%

    .e(ii(

    Ive!&%)

    ;&%< &e i

    Cu%%e! Pe%i&

    #ransferred1in costs weighted average!#ransferred1in costs 0I0O!Direct materials*onversion costs

    7+-.-9 7'8,8-9 -99!

    7+-.9 7'8,-)9 -99!

    R7).';8 78,)-9 +99!

    7-) 7'9,999 ),999!

    7-'.8

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    17-39 *ont2d.!

    SO+,TION EHI.IT 17-39A

    &teps ' and )% &ummari(e Output in Physical @nits and *ompute Equivalent @nits0I0O 6ethod of Process *osting0inishing Department of &tar #oys for $pril )99

    /S!e 1

    /S!e 2

    Equivale! ,i!"

    l& & P%&u!i&

    P)"ial

    ,i!"

    T%a"e%%e-

    i C&"!"

    i%e!

    a!e%ial"

    C&ve%"i&

    C&"!"

    /ork in process, beginning given!#ransferred1in during current period given!#o account for

    -99),999),-99

    work done before current period!

    *ompleted and transferred out during current period%0rom beginning work in processJ

    -99 '99B '99B!C -99 '99B 9B!C

    -99 '99B ;9B!

    -99

    9 -99 )99

    &tarted and completed ',;99 '99BC ',;99 '99BC ',;99 '99B

    ',;99

    ',;99 ',;99 ',;99

    /ork in process, endingA given!99 '99BC 99 9BC 99 +9B

    99 99 9 ')9

    $ccounted for ),-99/ork done in current period only ),999 ),'99 ',?)9

    JDegree of completion in this department% #ransferred1in costs, '99BC direct materials, 9BCconversion costs, ;9B.

    ),'99 physical units completed and transferred out minus -99 physical units completed and transferred out frombeginning work1in1process inventory.

    ADegree of completion in this department% transferred1in costs, '99BC direct materials, 9BC conversion costs, +9B.

    '81+?

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    17-39 *ont2d.!

    SO+,TION EHI.IT 17-39.

    &teps +, , and -% *ompute Equivalent @nit *osts, &ummari(e #otal *osts to $ccount 0or,and $ssign *osts to @nits *ompleted and to @nits in Ending /ork in Process0I0O 6ethod of Process *osting0inishing Department of &tar #oys for $pril )99

    T&!alP%&u!i&

    C&"!"T%a"e%%e

    -i C&"!"i%e!

    a!e%ial"

    C&ve%"i&

    C&"!"

    /ork in process, beginning given!

    7'8,-)9 H 79 H 78,)-9! 7 ),889 *osts of work done before current period!

    S!e 3! *osts added in current period given! ';-,9;; 7'9+,-;; 7)+,'99 7+

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    17-40 - min.! T%a"e%%e-i &"!"# ei(!e-ave%a(e a IO >e!&"*

    '. &olution E"hibit '819$ computes the equivalent units of work done to date in the Dryingand Packaging Department for transferred1in costs, direct materials, and conversion costs. &olutionE"hibit '819= calculates the cost per equivalent unit of work done to date in the Drying andPackaging Department for transferred1in costs, direct materials, and conversion costs, summari(estotal Drying and Packaging Department costs for week +8, and assigns these costs to unitscompleted and transferred out and to units in ending work in process using the weighted1averagemethod.

    ). &olution E"hibit '819* computes the equivalent units of work done in week +8 in theDrying and Packaging Department for transferred1in costs, direct materials, and conversion costs.&olution E"hibit '819D calculates the cost per equivalent unit of work done in week +8 in theDrying and Packaging Department for transferred1in costs, direct materials, and conversion costs,summari(es total Drying and Packaging Department costs for week +8, and assigns these costs tounits completed and transferred out and to units in ending work in process using the 0I0O method.

    SO+,TION EHI.IT 17-40A&teps ' and )% &ummari(e Output in Physical @nits and *ompute Equivalent @nits/eighted1$verage 6ethod of Process *ostingDrying and Packaging Department of 0rito1ay Inc. for /eek +8

    /S!e 1 /S!e 2

    P)"ial Equivale! ,i!"

    l& & P%&u!i&

    ,i!"

    /(ive

    T%a"e%%e-

    i C&"!"

    i%e!

    a!e%ial"

    C&ve%"i&

    C&"!"

    /ork in process, beginning ',)-9#ransferred in during current period -,999#o account for ;,)-9*ompleted and transferred out during current period -,)-9 -,)-9 -,)-9 -,)-9/ork in process, endingA ',999

    ',999 '99BC ',999 9BC ',999 9B ',999 9 99

    $ccounted for ;,)-9/ork done to date ;,)-9 -,)-9 -,;-9

    ADegree of completion in this department% transferred1in costs, '99BC direct materials, 9BC conversion costs, 9B.

    '81'

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    17-40 *ont2d.!

    SO+,TION EHI.IT 17-40.

    &teps +, , and -% *ompute Equivalent @nit *osts, &ummari(e #otal *osts to $ccount 0or, and$ssign *osts to @nits *ompleted and to @nits in Ending /ork in Process/eighted1$verage 6ethod of Process *ostingDrying and Packaging Department of 0rito1ay Inc. for /eek +8

    T&!al

    P%&u!i&

    C&"!"

    T%a"e%%e

    -i C&"!"

    i%e!

    a!e%ial"

    C&ve%"i&

    C&"!"

    S!e 3! /ork in process, beginning given! 7 +

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    17-40 *ont2d.!

    SO+,TION EHI.IT 17-40C

    &teps ' and )% &ummari(e Output in Physical @nits and *ompute Equivalent @nits0I0O 6ethod of Process *ostingDrying and Packaging Department of 0rito1ay Inc. for /eek +8

    /S!e 1

    /S!e 2

    Equivale! ,i!"

    l& & P%&u!i&

    P)"ial

    ,i!"

    T%a"e%%e-

    i C&"!"

    i%e!

    a!e%ial"

    C&ve%"i&

    C&"!"

    /ork in process, beginning given!#ransferred1in during current period given!#o account for

    ',)-9-,999;,)-9

    work done before current period!

    *ompleted and transferred out during current period%0rom beginning work in processJ

    ',)-9 '99B '99B!C ',)-9 '99B 9B!C

    ',)-9 '99B

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    17-40 *ont2d.!

    SO+,TION EHI.IT 17-40

    &teps +, , and -% *ompute Equivalent @nit *osts, &ummari(e #otal *osts to $ccount 0or,and $ssign *osts to @nits *ompleted and to @nits in Ending /ork in Process0I0O 6ethod of Process *ostingDrying and Packaging Department of 0rito1ay Inc. for /eek +8

    T&!al

    P%&u!i&

    C&"!"

    T%a"e%%e

    -i C&"!"

    i%e!

    a!e%ial"

    C&ve%"i&

    C&"!"

    /ork in process, beginning7?,9;9 H 79 H 7)99L7

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    17-41 )- min.! S!aa% &"!i( i! 'e(ii( a ei( &%< i

    %&e""*

    '. &olution E"hibit '81'$ shows equivalent units of work done in the current period of

    Direct materials )9,999 equivalent units*onversion costs '

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    17-41 *ont2d.!

    SO+,TION EHI.IT 17-41.

    &teps +, , and -% *ompute Equivalent @nit *osts, &ummari(e #otal *osts to $ccount 0or, and$ssign *osts to @nits *ompleted and to @nits in Ending /ork in Process@se of &tandard *osts in Process *osting, *ooking Department of ictoria *orporation for 6ay

    )99. T&!alP%&u!i&

    C&"!"

    i%e!

    a!e%ial"

    C&ve%"i&

    C&"!"

    /S!e 3! &tandard cost per equivalent unit given! 7 ; 7 +/ork in process, beginning given!

    Direct materials, +,999 7;C *onversion costs, ',

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    17-42 )-1+9 min.! Oe%a!i& &"!i(# equivale! ui!"*

    '. 6aterials and conversion costs of each operation, the total units produced, and the materialand conversion cost per unit for the month of 6ay are as follows%

    EB!%u"i& &%> T%i> ii"

    '. @nits produced '',999 '',999 -,999 ),999). 6aterials costs 7'+),999 7 ,999 7'-,999 7'),999+. 6aterials cost per unit ) :'! ').99 .99 +.99 ;.99. *onversion costs );?,-99 '+),999 ;?,999 ),999-. *onversion cost per unit : '! ).-9 ').99 '+.

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    17-44 - min.! T%a"e%%e-i &"!"# equivale! ui! &"!"# &%une to completebeginning work in process and the equivalent units of work done in >une to start and complete,999 units. 5ote that direct materials in beginning work in process is 9B complete because it isadded only when the process is

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    17-44 *ont2d.!

    SO+,TION EHI.IT 17-44A

    &teps ' and )% &ummari(e Output in Physical @nits and *ompute Equivalent @nits0I0O 6ethod of Process *osting#hermo1assembly Department of enno" Plastics for >une )99

    /S!e 1

    /S!e 2

    Equivale! ,i!"

    l& & P%&u!i&

    P)"ial

    ,i!"

    T%a"e%%e-

    i C&"!"

    i%e!

    a!e%ial"

    C&ve%"i&

    C&"!"

    /ork in process, beginning given!#ransferred1in during current period given!#o account for

    '-,999 ?,999),999

    work done before current period!

    *ompleted and transferred out during current period%0rom beginning work in processJ

    '-,999 '99B '99B!C '-,999 '99B 9B!C

    '-,999 '99B ;9B!

    '-,999

    9 '-,999 ;,999

    &tarted and completed

    ,999 '99BC ,999 '99BC ,999 '99B

    ,999

    ,999 ,999 ,999

    /ork in process, endingA given!-,999 '99BC -,999 9BC -,999 )9B

    -,999 -,999 9 ',999

    $ccounted for ),999/ork done in current period only from &olution E"hibit '81=! ?,999 '?,999 '',999

    JDegree of completion in this department% #ransferred1in costs, '99BC direct materials, 9BCconversion costs, ;9B.

    '?,999 physical units completed and transferred out minus '-,999 physical units completed and transferred out frombeginning work1in1process inventory.

    ADegree of completion in this department% transferred1in costs, '99BC direct materials, 9BC conversion costs, )9B.

    '81-9

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    17-44 *ont2d.!

    SO+,TION EHI.IT 17-44.

    &teps +, , and -% *ompute Equivalent @nit *osts, &ummari(e #otal *osts to $ccount 0or,and $ssign *osts to @nits *ompleted and to @nits in Ending /ork in Process0I0O 6ethod of Process *osting#hermo1assembly Department of enno" Plastics for >une )99

    T&!al

    P%&u!i&

    C&"!"

    T%a"e%%e

    -i C&"!"

    i%e!

    a!e%ial"

    C&ve%"i&

    C&"!"

    /ork in process, beginning7?9,999 H 79 H 7-,999! 7'+-,999 *osts of work done before current period!

    S!e 3! *osts added in current period given! '8),899 7-

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    I!e%e! EBe%i"e *ont2d.!

    I!e%e! EBe%i"e

    In this e"ercise you will take a tour of the Qolden *heese *ompany of *alifornia, the world2slargest fully integrated cheese plant. #o take the tour go to%http%GGourworld.compuserve.comGhomepagesGgcccG.

    'a. *lick on the U/elcomeV link. /hat are the primary products of the Qolden *heese*ompanyW

    'b. /hat are the secondary products of the manufacturing processW'c. $re there any residual waste byproductsW'd. /hat 3ournal entry is made to record the transfer of milk into the production processW

    )a. *lick on the UProcess &chematic.V /hat is the first product transferred out of the cheeseproduction processW /hat 3ournal entry is made to record this transferW

    )b. /hat is the second product transferred out of the cheese production processW /hat 3ournalentry is made to record this transferW

    +a. /hey cream is either sold as a finished product or processed further. /hat 3ournal entriesare made to record the transfer for final saleW

    +b. /hat 3ournal entry is made to record the transfer of whey cream for further processingW

    . =riefly describe the U*heddaringV and U=lockingV steps in the cheese production process.

    -. /hat proportion of milk solids is converted into cheeseW /hat happens to the restW

    S&lu!i& !& I!e%e! EBe%i"e

    'a. #he Qolden *heese *ompany produces a variety of cheese products, including speciali(edwhey and protein concentrate products used in baby foods and nutritional supplements!.

    'b. Even the residual milk sugar is fermented and distilled into ethyl alcohol that is used as afuel additive.

    'c. $ll the components of the milk are utili(ed. #he residual milk sugar is fermented anddistilled into ethyl alcohol, which is used as a fuel additive. Memaining milk solids areconcentrated into an animal feed. Only water is left after all the products and byproductsare e"tracted, and the water is used in cleaning the plant.

    'd. /ork in Process 4 *heese XXX6aterials Inventory 4 6ilk XXX

    )a. &weet cream is the first byproduct transferred out of the cheese production process into the

    whey cream production process. #he 3ournal entry to record the transfer is%

    /ork in Process 4 /hey *ream XXX/ork in Process 4 *heese XXX

    )b. #he second product transferred out of the cheese production process is sweet whey. #he3ournal entry to record the transfer is

    /ork in Process 4 /hey *ream XXX/ork in Process 4 *heese XXX

    '81-)

    http://ourworld.compuserve.com/homepages/gccc/http://ourworld.compuserve.com/homepages/gccc/http://ourworld.compuserve.com/homepages/gccc/
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    I!e%e! EBe%i"e*ont2d.!

    +a. #he following 3ournal entry is used to record whey cream transferred to finished goods.

    0inished Qoods 4 /hey *ream XXX/ork in Process 4 /hey *ream XXX

    +b. #he 3ournal entry to record the transfer of whey cream to whey protein concentrateprocessing is

    /ork in Process 4 /hey Protein *oncentrate XXX/ork in Process 4 /hey *ream XXX

    . $fter curds and whey are separated, the curds go through a UcheddaringV process. In thecheddaring process curds are blown into the cheddar1master tower where they are stacked for twohours. #his increases lactic acid production, which controls curd moisture and leads to proper curdte"ture. 5e"t, the curd is blown into blockformers where the curd is pressed into 1poundblocks, and cooled to -9 degrees. #hen the cheese is transferred to the shredding process where it

    is weighed and cut for sale.

    -. $ppro"imately half of the solids in milk are converted to cheeseC the remaining solids, andvirtually all of the liquid, are drained from the cheese curd as whey.

    Ca!e% 17 ie& Ca"e

    The video case can be discussed usin# only the case riteup in the chapter! &lternatively'

    instructors can have students vie the videotape of the company that is the subject of the case!The videotape can be obtained by contactin# your Prentice Hall representative! The case

    0uestions challen#e students to apply the concepts learned in the chapter to a specific business

    situation!

    NANT,CDET NECTARS PROCESS COSTING

    '* In a process1costing system, the unit cost of a product or service is obtained by assigningtotal costs to many identical or similar units, in this case, single1serve 3uice beverage bottles.

    ).

    i%e! a!e%ial I!e> S!a(e i P%&u!i& P%&e""Maw ingredients for 3uices water, cane sugar, fruit3uice concentrates, etc.!

    =eginning

    =ottles and caps 6iddle

    abels, cardboard trays, shrink1wrap End

    +. *onversion costs include labor associated with the production line, depreciation onproduction equipment, plant utilities, plant maintenance costs, and plant property ta"es.

    . In the process described for the manufacture of 5antucket 5ectars 3uices, there is nopartially completed inventory, as the product is mi"ed and bottled within a few hours eachproduction day. $ccordingly, the calculation of equivalent units in this case makes little sense. $sthere is no partially completed ending inventory, there will be no difference between the cost ofthe units transferred out under the weighted average or 0I0O methods.

    '81-+

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