Managerial and Cost Accounting Exercises I 14 Problem 4: Solution Solution 4 a1)of the raw materials purchases remain in ending raw materials inventory. (25% X $10,500,000 = $2,625,000). Save my name, email, and website in this browser for the next time I comment. Cost of Production Report Units received from preceding department A, (Abnormal loss – 1/2 materials, labor, and overhead), Labor and factory overhead = 9,000 + (2,000, Conversion cost (labor + factory overhead), Ending work in process inventory (50% complete). The number of equivalent units of the fabrication department’s direct labor in all inventories at June 30. The costs for Department 2 for April were: The degree of completion of the work in process as to costs originating in department 2 was: 50% of units were 40% complete; 20% were 30% complete; and the balance were 20% complete. What is the treatment of normal and abnormal loss in process costing system? Your email address will not be published. Accounting For Management, Explanations, Exercises, Problems and Calculators, Exercise 1: Computation of equivalent units under weighted average and FIFO method, Exercise 2: Preparation of quantity schedule in process costing, Exercise 3: Quantity schedule and equivalent units, Exercise 4: Cost per equivalent unit – weighted average and FIFO method, Exercise 5: Equivalent units, cost per equivalent unit – weighted average method, Exercise 6: cost reconciliation – weighted average method, Exercise 7: Quantity schedule, cost per equivalent units – FIFO method, Exercise 8: Cost reconciliation – FIFO method, Exercise 9: Process costing journal entries, Exercise 10: Cost of production report of 2nd department, Exercise 11: Cost of production report – normal loss, Exercise 12: Cost of production report – abnormal loss, Exercise 13: Cost of production report – normal loss at the end of process, Solutions: Available for all 13 exercises. Transferred in during the month (12,000 units), Unit cost for units transferred in from department 1. $56,500. The product of a manufacturing concern passes through two processes A and B and then to finished stock. all related to units transferred to finished goods: No unused raw materials or packaging materials. Packaging department: 100 units, 3/4 complete as to packaging materials and 1/4 complete as to direct labor. Required: Prepare Cost of production report. Cost of Production Report Cost of production report ;normal spoilage .malamud company uses process costing .all material are added at the beginning of the process .the product is inspected when it is 80% converted ,and spoilage is identified only at that point. A company’s Department 2 costs for June were: The quantity schedule shows 12,000 units were received during the month from Department 1; 7,000 units were transferred to finished goods; and 5,000 units in process at the end of June were 50% complete as to materials cost and 25% complete as to conversion cost. For the Month of June, 19___, Materials = 7,000 + (5,000 × 50%) = 9,500 units, Labor and factory overhead = 7,000 + (5,000 × 25%) = 8,250 units. Cost of Production Report Labor and factory overhead = 9,000 + (2,000 × 70%) + 450 + 550, Materials = $18,000 / 9,000 = $2.00 per unit, Labor and factory overhead = $45,600 / 11,400 = $4.00 per unit. Shipping for finished goods are: 400 units. Systems Design: Process Costing Solutions to Questions 4-1 A process costing system should be used in situations where a homogeneous product is produced on a continuous basis. Department 2 You are the production supervisor of the Inspection Department of a lumber processing plant. 25% a2)e total amount placed into process was $20,125,000 (($10,500,000 X 75%) + $7,000,000 + $5,250,000)). Also see formula of gross margin ratio method with financial analysis, balance sheet and income statement analysis tutorials for free download on Accounting4Management.com. On April 30, department B had 5,000 units of work in process 60% complete as to conversion as costs. The following information was obtained from the department’s quantity schedule: Equivalent units of production calculation. Brooks Inc. Equivalent units of Fabrication department’s direct labor in all inventories, Jun 30, 19___, Equivalent units of packaging materials in all inventories, June 30, 19___. 4-2 Job-order and processing costing are similar in the following ways: 1.Job-order costing and process costing have the same basic purposes—to assign Of the 60,000 units received, 50,000 were transferred out; 9,000 units were in process at the end of the month (all materials, 2/3 converted); 1,000 lost units were 1/2 complete as to materials and conversion costs. It is Calculate equivalent units of production. Costs added in the Assembly department were: materials, $41,650; labor, $101,700; and factory overhead. The T account for Work in Process in the Solutions carries an opening balance of $20,000.00, but the balance given in the actual question is $15,000. Brooks Inc. uses process costing. In department 2, inspection takes place at the 96% stage of completion, after which materials are added to good units. For the month of April, 19|____, Materials, labor, and factory overhead = 4,000 + (1,000 32%) = 4,320 units. How the timing of normal and abnormal loss is considered in a cost of production report? During march ,10,500 units were put into process. Copyright 2012 - 2020. Of Department 2 I really understood the explanations given, Your email address will not be published. It is ascertained that in each process normally 5% of the total weight is lost and 10% is scrap which from processes A and B realizes Rs.80 … The number of equivalent units of packaging materials in all inventories at June 30. The following information related to department B for January: Required: Cost of Production report for department B. At the end of the fiscal year, June 30, the following inventory of product D is on hand: Very fascinating! Department 2 Labor and factory overhead = 25,000 + (42,00 × 50%) + (750 × 96%) + (50 × 96%), Materials = $12,500 / 25,000 = $.50 per unit, Labor and factory overhead = $139,340 / 27,888 = $5.00 per unit. Required fields are marked *. There was no beginning inventory. The number of equivalent units of raw materials in all inventories at June 30. Journal Entry #3 cites administrative salaries at $20,000.00, but in the Solutions section, administrative salaries are posted in the journal at $200,000.00. A spoilage rate of 3% of good output is considered normal. Also learn latest Accounting & management software technology with tips and tricks. Prepare the format of cost of production report. Normal spoilage is expected to be 5% of good output. Carola Chemical Inc. The Sterling Company uses process costing. The cost department collected following figures for department 2: Required: A cost of production report for department 2 for December. Process costing … Addition of materials and beginning inventory, Business and Quality Improvement Programs, Costing of Units Transferred Out; Abnormal Loss, Cost of Production Report; Normal and Abnormal Loss, Cost of Production Report; Spoiled Units – Normal and Abnormal, Definition and explanation of process costing system, Characteristics and Procedures of Process Costing System, Procedure for Materials, Labor and Factory Overhead Costs in a Process Costing System, General Questions and Answers About Process Costing, Cost Flow and Journal Entries–Process Costing System, Characteristics and Procedure of Process Costing System, General Questions and Answers about Process Costing System, Accounting Principles and Accounting Equation. Materials = 50,000 + 9,000 + 1,000/2 lost units = 59,500 units, Labor and factory overhead = 50,000 + (9,000 × 2/3) + 1,000/2 lost units = 56,500, Materials = $41,650 / 59,500 = $0.70 per unit, Labor = $101,700 / 56,500 = $1.80 per unit, Factory overhead = $56,500 / 56,500 = $1.00 per unit. Fabrication department: 300 units, 1/3 complete as to raw materials and 1/2 complete as to direct labor. View Process Costing Practice Exercise Solution.xlsm from ACCY 202 at University of Mississippi. Pietra – Gonatas, Inc. uses process costing to account for the costs of its only product, product D. Production takes place in three departments; Fabrication, Assembly, and Packaging. The cost per equivalent unit for conversion costs. Materials are added in the beginning of the process in department B. Materials are added at the end of the process, following inspection. Hettinger Inc., uses process costing system in its two producing departments. View 2_Exercises_Job_order_costing_with_solution.pdf from AA 1Ágnes Siklósi PhD Managerial Accounting Job-Order Costing Seminar 2 True/False Questions 1. Equivalent Units of Production: During April, 20,000 units were transferred in from department A at a … In department B, conversion costs are incurred uniformly throughout the process. Materials cost of $6,500 and conversion cost of $9,000 were added in department B. The entire loss is considered abnormal and is to be charged to factory overhead. Process Costing Problem 3: . 19____, (Cost from preceding departments / Units from preceding departments – Lost units) – Unit cost from preceding department, (5,000 × 1.80) = $9,000 / 50,000 = $0.18.