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Chapter 6 111

Chapter 6
Process Costing
Questions
1. A company that produces homogeneous
goods in mass quantities is likely to use a
process costing system. The company can
either have a single department or multiple
departments.
Job order costing and process costing are
similar in that they are both methods of
assigning costs to products. Also, the methods
use similar product accounts (raw materials,
work in process, finished goods, cost of goods
sold to capture the costs associated with
production and use similar cost pools (!", !#,
$%.
Job order costing and process costing differ in
the way in which costs are gathered. &n a 'ob
order costing system, costs are accumulated
by department and by 'ob( in a process
costing system, costs are accumulated by
production departments for the products that
flow through those departments. &n process
costing, production must be determined on the
basis of equivalent units to properly allocate
the costs associated with each cost
component to the work that was completed
during the period and to the work that is still in
process at the end of the period. )quivalent
units of production are unnecessary in 'ob
order costing.
*. The only difference between weighted
average and +&+$ equivalent units of
production is in the treatment of the work that
was completed on beginning inventory in the
prior period. ,nder weighted average, the
work performed on beginning inventory in the
prior period is combined with the work
performed during the current period. ,nder
+&+$, the work performed on beginning
inventory during the prior period is held out
separately and not commingled with the work
performed during the current period.
The +&+$ method more accurately portrays
the actual physical flow of units through the
manufacturing process, because it is most
likely that the units in beginning inventory will
be the first units to be completed during the
current period - thus a first-in, first-out flow.
.. )quivalent units of production is an approach
to put partially completed and wholly
completed units on a comparable basis.
/ithout use of equivalent units, partially
completed and fully completed units would be
combined as if they were homogeneous
measures of output. This would result in
meaningless data since fully and partially
completed units are different outputs.
0. The units 1started and completed1 in a period
are calculated as the total units completed
during the period minus the units that were in
the beginning inventory. This figure can be
used in both the weighted average and +&+$
methods shown in the chapter. (There are,
however, other methods of computing ),2 in
which the units started and completed are not
shown separately. This calculation is not
necessary for the weighted average method
because work performed on the current
period3s beginning inventory in the prior period
need not be separated from work performed
to complete the beginning inventory in the
current period. This calculation is necessary
for the +&+$ method because work in the prior
period cannot be commingled with work
performed in the current period.
,nder weighted average, costs are assigned
to ending inventory by multiplying the cost per
),2 for each cost component times the ),2
calculated for that component( these costs are
then totaled. 4osts are assigned to the units
completed5transferred out by multiplying the
total cost per ),2 times the number of units
that have been completed and transferred out
during the period.
The cost assigned to ending inventory is
handled the same way for +&+$ as for
weighted average. &n determining the cost of
the units completed and transferred out,
however, the cost of completing the beginning
inventory must first be determined by
multiplying the equivalent units of production
performed this period for each cost
component times the cost per ),2 for each
cost component. The cost of completing the
beginning inventory is then added to the
original beginning inventory cost to find the
total cost of producing the beginning inventory
units. The cost of the units started and
completed in the current period is found by
multiplying the total cost per ),2 times the
Chapter 6
number of units started and completed this
period. Adding the total cost of producing
beginning inventory to the cost of the units
started and completed will give the total cost
transferred out of the department during the
period.
6. The only difference between process costing
in a multi-department environment and a
single department environment is that there
will be a cost component labeled 1Transferred
&n.1 The costs of previous departments must
follow the flow of goods into successor
departments to determine the full cost of
production.
7. ,nder a standard costing system, the
"aterial, &n-2rocess, and +inished 8oods
&nventory accounts are accounted for at
standard costs. The actual costs of each
process or each department are also captured
in a standard costing system and variances
can be computed as differences between the
standard and actual amounts for each cost
component. The variances provide
information to management about the
efficiency of operations because the variances
reflect differences between e9pected
(standard and actual costs.
:. A hybrid costing system is one in which
process costing is used to account for certain
product costs and 'ob order costing is used to
account for other product costs. %ybrid
costing is common in environments that have,
for e9ample, material costs that vary
substantially from one production run to
another (gold versus copper, but require all
products to flow
through the same physical conversion
processes. &n this e9ample, the material would
be accounted for on a 'ob order basis and the
conversion would be accounted for using
process costing.

;. <ormal loss refers to an e9pected reduction in
production quantity based on the production
technology and production practices of the
company. Abnormal loss refers to a quantity of
loss above the normal loss quantity.
<ormal loss creates an e9pected cost of
production so the cost of such a loss is
inventoriable as part of the cost of good
production using the =method of neglect.> The
method of neglect requires no specific
computations regarding spoiled units( all costs
are assigned to good units. The cost of spoiled
units that have been found at an inspection
point will be assigned to all units that have
passed the inspection point. Thus, the method
of neglect assigns spoilage costs by simply
ignoring (neglecting the spoiled units. The
method of neglect raises the cost per
equivalent unit because no costs are assigned
to the spoiled units.
Abnormal spoilage cost is not e9pected, and,
thus, it is not inventoriable. Abnormal losses
would be more likely to be preventable than
normal losses because abnormal losses are
less likely to be caused by factors that are
inherent in the materials or production
methods. +or e9ample, a known amount of
material loss (waste is to be e9pected if lower
quality materials are utili?ed. %owever, any
loss beyond the e9pected amount would likely
be caused by other factors that are sub'ect to
management control, e.g., production errors.
Exercises
9. a.,b. Beginning inventory 360,000 Beginning inventory 360,000
Starte !10,000 Starte an co"p#ete $%0,000
&o account 'or ()0,000 Ening inventory 90,000
*ccounte 'or ()0,000
+nits ,- CC
Beginning inventory 360,000 360,000 360,000
Starte . co"p#ete $%0,000 $%0,000 $%0,000
Ening inventory /$001 90,000 90,000 36,000
E2uiva#ent units ()0,000 (16,000
10. a.,b. Beginning inventory 360,000 Beginning inventory 360,000
Starte !10,000 Starte an co"p#ete $%0,000
11%
Chapter 6 113
&o account 'or ()0,000 Ening inventory 90,000
*ccounte 'or ()0,000
+nits ,- CC
Beginning 34P co"p#ete 360,000 0 10(,000
Starte . co"p#ete $%0,000 $%0,000 $%0,000
Ening inventory /$001 90,000 90,000 36,000
E2uiva#ent units !10,000 !6$,000
11. a.,b. Beginning inventory %!,000 Beginning inventory %!,000
Starte %(0,000 Starte an co"p#ete %!0,000
&o account 'or 30!,000 Ening inventory 30,000
*ccounte 'or 30!,000
+nits ,- ,5 67
Beginning inventory %!,000 %!,000 %!,000 %!,000
Starte . co"p#ete %!0,000 %!0,000 %!0,000 %!0,000
Ening inventory 30,000 30,000 1%,000 1(,000
E2uiva#ent units 30!,000 %(),000 %93,000
b. +nits ,- ,5 67
Beginning inventory %!,000 0 ),!00 6,%!0
Starte . co"p#ete %!0,000 %!0,000 %!0,000 %!0,000
Ening inventory 30,000 30,000 1%,000 1(,000
E2uiva#ent units %(0,000 %69,!00 %)$,%!0
c. E2uiva#ent units /3*1 30!,000 %(),000 %93,000
E+Ps 8 Beginning 34P /%!,0001 /1),!001 /1(,)!01
E2uiva#ent units /94961 %(0,000 %69,!00 %)$,%!0
1%. a. Beginning inventory 3,600
+nits starte 1(),000
+nits to account 'or 190,600
b. +nits co"p#ete 1($,%00
Beginning inventory /3,6001
Starte . co"p#ete 1(0,600
c. +nits to account 'or 190,600
+nits co"p#ete /1($,%001
+nits in E4 6,$00
-ateria# 5abor 6verhea
Beginning inventory 3,600 3,600 3,600
Starte . co"p#ete 1(0,600 1(0,600 1(0,600
Ening inventory %,!60 1,600 6$0
E+P /3*1 1(6,)60 1(!,(00 1($,($0
Chapter 6
. -ateria# 5abor 6verhea
Beginning inventory 1,$$0 %,160 %,((0
Starte . co"p#ete 1(0,600 1(0,600 1(0,600
Ening inventory %,!60 1,600 6$0
E+P /94961 1($,600 1($,360 1($,1%0
e. -ateria# 5abor 6verhea
E+P /3*1 1(6,)60 1(!,(00 1($,($0
E2uiva#ent units in B4 /%,1601 /1,$$01 /)%01
E+P /94961 1($,600 1($,360 1($,1%0
13. a. &ota# tons to account 'or:
Beginning inventory 60,000
&ons starte (00,000
&ota# (60,000
b. &ota# tons to account 'or: (60,000
5ess tons in ening inventory /3!,0001
&ons trans'erre out (%!,000
5ess tons in beginning inventory /60,0001
&ons starte . co"p#ete /tons1 )6!,000
c. 3eighte average: -ateria# Conversion
Beginning inventory 60,000 60,000
Starte . co"p#ete )6!,000 )6!,000
Ening inventory 31,!00 %1,000
E+P (!6,!00 ($6,000
. 9496: -ateria# Conversion
Co"p#ete beginning inventory 0 36,000
Starte an co"p#ete )6!,000 )6!,000
Ening inventory 31,!00 %1,000
E+P )96,!00 (%%,000
1$. ,- ,5 6verhea
Beginning inventory ;1$,9%0 ; 36,%00 ; 9,900
Current perio )(,((0 )9,(00
<
$%,600
&ota# costs ;93,(00 ;116,000 ;!%,!00
,ivie by E+P %6,(00 %$,$00 %1,000
Cost per E+P ;3.!0 ;$.)!
<<
;%.!0
<
,irect 5abor = Conversion Cost > 6verhea = ;1%%,$00 8 ;$%,600 = ;)9,(00
<<
roune
1!. ,- ,5 6verhea
E+Ps 8 /3*1 %6,(00 %$,$00 %1,000
E+Ps 8 Beginning 34P /3,6001 /$,0001 /3,9601
E+Ps 8 /94961 %3,%00 %0,$00 1),0$0
Current perio cost ;)(,((0 ;)9,(00 ;$%,600
11$
Chapter 6 11!
,ivie by E+P %3,%00 %0,$00 1),0$0
Cost per E+P ;3.$0 ;3.91
<
;%.!0
<
roune
16. a. ,- ,5 67 &ota#
Beginning 34P ; 9,(00 ; 3,160 ; !,010 ; 1),9)0
Current perio %),000 1),360 $%,%$0 (6,600
&ota# ;36,(00 ;%0,!%0 ;$),%!0 ;10$,!)0
b. &ota# costs ;36,(00 ;%0,!%0 ;$),%!0 ;10$,)!0
E+Ps 8 /3*1 (0,000 )6,000 )!,000
Cost per E+P ;0.$6 ;0.%) ;0.63 ;1.36
c. Current costs ;%),000 ;1),360 ;$%,%$0 ; (6,600
E+Ps 8 /94961 60,000 6%,000 66,000
Cost per E+P ;0.$! ;0.%( ;0.6$ ;1.3)

. E+Ps 8 /3*1 (0,000 )6,000 )!,000
E+Ps 8 /94961 60,000 6%,000 66,000
E+Ps > Beg. 34P %0,000 1$,000 9,000
Percent co"p#ete 1000 )00 $!0
1). +nits +nits
Beginning inventory 9,(00 Beginning inventory 9,(00
+nits starte (1,!00 Starte . co"p#ete )6,900
+nits to account 'or 91,300 Ening inventory $,600
*ccounte 'or 91,300
E+P co"putation:
6ther
Canisters -ateria#s ,5 67
Beginning 34P 9,(00 9,(00 9,(00 9,(00
Starte . co"p#ete )6,900 )6,900 )6,900 )6,900
E4 $,600 1,3(0 1,1!0 $60
E+Ps 8 /3*1 91,300 ((,0(0 (),(!0 (),160
Chapter 6
Costs: 6ther
Canisters -ateria#s ,5 67 &ota#
Beginning 34P ; ),3(% ; 6,1(( ; 3,963 ; 3,$3% ; %0,96!
Current 6!,6!( (6,%96 )(,616 1!),(1$ 3((,3($
&ota# costs ;)3,0$0 ;9%,$($ ;(%,!)9 ;161,%$6 ;$09,3$9
,ivie by E+Ps 91,300 ((,0(0 (),(!0 (),160
Cost per E+P ;0.(0 ;1.0! ;0.9$ ;1.(! ;$.6$
1(. a. +nits
Beginning inventory 1,000
+nits starte 3,(00
+nits to account 'or $,(00
Beginning inventory co"p#ete 1,000
+nits starte . co"p#ete 3,000
&ota# units co"p#ete $,000
Ening inventory (00
+nits accounte 'or $,(00
-ateria# Conversion
+nits in beginning inventory 300 1!0
+nits starte . co"p#ete 3,000 3,000
E2uiva#ent units in ening inventory 3%0 $(0
E+P /94961 3,6%0 3,630
b. -ateria# Conversion &ota#
Current costs ;66,9)0 ;%9,0$0 ;96,010
,ivie by E+P /94961 3,6%0 3,630
Cost per E+P ;1(.!0 ;(.00 ;%6.!0
19. a. !%0,000 ? /;3.)! @ ;$.!0 @ ;!.101 = !%0,000 x ;13.3! = ;6,9$%,000
b. ,-: ;3.)! x /)$,000 x 10001 ;%)),!00
,5: ;$.!0 x /)$,000 x 3001 99,900
67: ;!.10 x /)$,000 x $!01 169,(30
&ota# ;!$),%30
c. Cost o' goos trans'erre out ;6,9$%,000
Ening 34P !$),%30
&ota# ;),$(9,%30
%0. a. -ateria#: %),000 A %),000 = 1000
PacBaging: 0 A %),000 = 00
5abor: (,100 A %),000 = 300
6verhea: 9,$!0 A %),000 = 3!0
116
Chapter 6 11)
b. Beginning 34P
-ateria# ;3$$,!%0
5abor 9!,931
6verhea )%,9!$ ;!13,$0!
Co"p#ete Beginning 34P
PacBaging ;1.!0 /%),000 ? 10001 ; $0,!00
5abor ;6.$% /%),000 ? )001 1%1,33(
6verhea ;3.($ /%),000 ? 6!01 6),39% %%9,%30
&ota# ;)$%,63!
c. /1(!,000 8 %),0001 ? /;1%.)! @ ;1.!0 @ ;6.$% @ ;3.($1 =
1!(,000 x ;%$.!1 = ;3,()%,!(0
. -ateria# /;1%.)! ? 6,000 ? 10001 ; )6,!00
5abor /;6.$% ? 6,000 ? $001 1!,$0(
6verhea /;3.($ ? 6,000 ? !!01 1%,6)%
&ota# ;10$,!(0
%1. a. Beginning 34P !00
Starte $,%00
+nits to account 'or $,)00
Beginning 34P !00
Starte . co"p#ete $,0!0
Ening 34P 1!0
+nits accounte 'or $,)00
-ateria# Conversion
Beginning 34P %00 3!0
Starte . co"p#ete $,0!0 $,0!0
Ening inventory 1%0 10!
E+P /94961 $,3)0 $,!0!
-ateria# /;31,$6$ A $,3)01 ;).%0
Conversion /;11,)13 A $,!0!1 %.60
&ota# cost per 9496 E+P ;9.(0
b. &rans'erre out:
Costs in B4 ;%,36$
Cost to co"p#ete B4
,- /%00 ? ;).%01 1,$$0
CC /3!0 ? ;%.601 910 ; $,)1$
Starte . co"p#ete /$,0!0 ? ;9.(01 39,690
&ota# cost trans'erre ;$$,$0$
Chapter 6
c. -ateria# Conversion
Beginning 34P !00 !00
Starte . co"p#ete $,0!0 $,0!0
Ening inventory 1%0 10!
E+P $,6)0 $,6!!
-ateria# /;33,391 A $,6)01 ;).1! /roune1
Conversion /;1%,1!0 A $,6!!1 %.61 /roune1
&ota# cost per 3* E+P ;9.)6
. Ening 34P
,- /1%0 x ;).1!1 ; (!(.00
CC /10! x ;%.611 %)$.0!
&ota# ;1,13%.0!
%%. a. 9abrication:
Beginning inventory !,000 Beginning inventory !,000
Starte $0,000 Starte . co"p#ete 33,%00
+nits to account 'or $!,000 Ening inventory 6,(00
+nits accounte 'or $!,000
+nits -ateria# Conversion
Beginning 34P !,000 !,000 !,000
Starte . co"p#ete 33,%00 33,%00 33,%00
Ening inventory 6,(00 6,(00 $,0(0
E+P /3*1 $!,000 $!,000 $%,%(0
*sse"b#y:
Beginning inventory %,000 Beginning inventory %,000
Starte 3(,%00 Starte . co"p#ete 3%,100
+nits to account 'or $0,%00 Ening inventory 6,100
+nits accounte 'or $0,%00
+nits &rans8in -ateria# Conversion
Beginning 34P %,000 %,000 %,000 %,000
Starte . co"p#ete 3%,100 3%,100 3%,100 3%,100
Ening inventory 6,100 6,100 0 91!
E+P /3*1 $0,%00 $0,%00 3$,100 3!,01!
b. 9abrication
+nits &rans8in -ateria# Conversion
Beginning inventory !,000 !,000 0 3,)!0
Starte . co"p#ete 33,%00 33,%00 33,%00 33,%00
Ening inventory 6,(00 6,(00 6,(00 $,0(0
E+P /94961 $!,000 $!,000 $0,000 $1,030
11(
Chapter 6 119
*sse"b#y:
+nits &rans84n -ateria# Conversion
Beginning inventory %,000 %,000 %,000 1,300
Starte . co"p#ete 3%,100 3%,100 3%,100 3%,100
Ening inventory 6,100 6,100 0 91!
E+P /94961 $0,%00 $0,%00 3$,100 3$,31!
%3. a. 1(,000 x 1000 x ;0.10 = ;1,(00
1(,000 x $!0 x ;0.09 = )%9
&ota# cost in B4 ;%,!%9
b. 1$,$00 x 1000 x ;0.10 = ;1,$$0.00
1$,$00 x 6!0 x ;0.09 = ($%.$0
&ota# cost in E4 ;%,%(%.$0
c. Beginning inventory 1(,000
Starte 130,000
+nits to account 'or 1$(,000
&ota# units 1$(,000
+nits in E4 /1$,$001
+nits trans'erre out 133,600
Cost trans'erre out = 133,600 ? ;0.19 = ;%!,3($
. -ateria# 5abor 67
&o co"p#ete B4 /units1 0 9,900 9,900
Starte . co"p#ete 11!,600 11!,600 11!,600
Ening inventory 1$,$00 9,360 9,360
E2uiva#ent units /94961 130,000 13$,(60 13$,(60
-u#tip#y by unit cost x 0.10 x 0.0% x 0.0)
Stanar cost o' perio ;13,000 ;%,69).%0 ; 9,$$0.%0
*ctua# cost o' perio /1(,$001 /%,69(.001 /1!,%00.001
Cariance ; /!,$001+ ; /0.(01+ ;/!,)!9.(01+
e. 3orB in Process 4nventory 13,000.00
-ateria# Cariance !,$00.00
DaE -ateria# 4nventory 1(,$00.00
3orB in Process 4nventory %,69).%0
5abor Cariance .(0
3ages Payab#e /or Cash1 %,69(.00
3orB in Process 4nventory 9,$$0.%0
+nerapp#ie 6verhea !,)!9.(0
-anu'acturing 6verhea 1!,%00.00
%$. a. +nits to account 'or:
Beginning inventory 6,000
Starte 1!!,000
&ota# 161,000
Chapter 6
Beginning 34P 6,000
Starte . co"p#ete 1!1,000
Ening 34P $,000
+nits accounte 'or 161,000

4ngre. PacBaging Conversion
Beginning 34P 0 6,000 1,(00
Starte an co"p#ete 1!1,000 1!1,000 1!1,000
Ening inventory $,000 0 %,$00
E+P /94961 1!!,000 1!),000 1!!,%00
b. Cost o' goos co"p#ete: 1!),000 x ;0.6( = ;106,)60
c. Cost o' ening EorB in process:
4ngreients /$,000 x ;0.$!1 ;1,(00
Conversion /%,$00 x ;0.1(1 $3%
&ota# ;%,%3%
%!. a. +nits to account 'or:
Beginning inventory 0 Starte . co"p#ete %,$00
Starte %,!00 Ening inventory 100
&ota# %,!00 +nits accounte 'or %,!00

-ateria# 5abor 6verhea
Starte an co"p#ete %,$00 %,$00 %,$00
Ening inventory 100 %! 3!
E+P %,!00 %,$%! %,$3!
Cost o' goos trans'erre to 'inishe goos:
,irect "ateria#:
,acron /%(0 ? ;101 ; %,(00
,eni" /$)0 ? ;(1 3,)60
Cotton /1,6!0 ? ;1%1 19,(00 ;%6,360
,irect #abor /%,$00 ? ;1%1 %(,(00
6verhea /%,$00 ? ;91 %1,600
&ota# ;)6,)60
b. Cost o' ening EorB in process:
,irect "ateria#:
,acron /%0 ? ;101 ; %00
,eni" /30 ? ;(1 %$0
Cotton /!0 ? ;1%1 600 ; 1,0$0
,irect #abor /%! ? ;1%1 300
6verhea /3! ? ;91 31!
&ota# ; 1,6!!
%6. Each stuent Ei## have a i''erent ansEer. Fo ansEer provie.
%). Each stuent Ei## have a i''erent ansEer. Fo ansEer provie.
%(. *## spoi#age is nor"a# because the 1,$00 ga##ons is #ess than 0.01 x 1(0,000.
1%0
Chapter 6 1%1
a an b. +nits -ateria# Conversion
Beginning inventory /600G )001 (,000
Ha##ons starte 1(0,000
Ha##ons to account 'or 1((,000
Beginning inventory co"p#ete (,000 3,%00 %,$00
Ha##ons starte an co"p#ete 1)$,600 1)$,600 1)$,600
&ota# ga##ons trans'erre 1(%,600
Ening inventory /$00G %001 $,000 1,600 (00
For"a# spoi#age 1,$00 0 0
Ha##ons accounte 'or /9496 E+P1 1((,000 1)9,$00 1)),(00
%9. a. 10,000 @ 60,000 = )0,000 units
b. 60,000 ? 0.0! = 3,000 units
c. )0,000 8 /!(,%00 @ (,000 @ 3,0001 = (00 units
. +nits -ateria# Conversion
Beginning inventory 10,000
+nits starte 60,000
+nits to account 'or )0,000
&rans'erre out !(,%00 !(,%00 !(,%00
Ening inventory (,000 (,000 1,600
For"a# spoi#age 3,000 0 0
*bnor"a# spoi#age (00 (00 (00
+nits accounte 'or )0,000 6),000 60,600
e. Cost o' nor"a# spoi#age is auto"atica##y sprea a"ong a## o' the re"aining
units prouce. &his is one by using the "etho o' neg#ect an o"itting
these spoi#e units 'ro" the E+P ca#cu#ations.
'. Cost o' abnor"a# spoi#age is Eritten o'' as a perio cost /#oss1.
Chapter 6
30. For"a# spoi#age a##oEe = 60,000 pouns x 0.0( = $,(00 pouns
+nits -ateria# Conversion
Beginning inventory 1(,000
Pouns starte 60,000
Pouns to account 'or )(,000
Beginning inventory co"p#ete 1(,000 0 1%,600
Pouns starte an co"p#ete $!,000 $!,000 $!,000
Ening inventory 10,(00 10,(00 %,160
For"a# spoi#age $,%00 0 0
Pouns accounte 'or /94961 )(,000 !!,(00 !9,)60
&ota# -ateria# Conversion
Beginning inventory cost ;1%,$00
Current costs 3),$!( ;19,!30 ;1),9%(
&ota# costs ;$9,(!(
,ivie by E+P !!,(00 !9,)60
Cost per E+P ;0.6! ;0.3! ;0.30
Cost *ssign"ent
&rans'erre out:
Beginning inventory cost ;1%,$00
Conversion cost to co"p#ete /1%,600 x ;0.301 3,)(0
&ota# cost o' beginning inventory ;16,1(0
Starte . co"p#ete /$!,000 x ;0.6!1 %9,%!0 ;$!,$30
Ening inventory:
-ateria# /10,(00 x ;0.3!1 ; 3,)(0
Conversion /%,160 x ;0.301 6$( $,$%(
&ota# costs accounte 'or ;$9,(!(
31. a. +nits -ateria# Conversion
Beginning inventory $0,000
Pouns starte $%!,000
Pouns to account 'or $6!,000
B4 co"p#ete $0,000 0 6,000
Starte . co"p#ete $0!,000 $0!,000 $0!,000
Ening inventory 10,000 10,000 %,!00
For"a# spoi#age %,000 0 0
*bnor"a# spoi#age (,000 (,000 !,600
E+P /94961 $6!,000 $%3,000 $19,100
b. Ening inventory:
-ateria# /10,000 x ;%.$01 ;%$,000
Conversion /%,!00 x ;$.)01 11,)!0
&ota# cost ;3!,)!0
1%%
Chapter 6 1%3
c. *bnor"a# spoi#age:
-ateria# /(,000 x ;%.$01 ;19,%00
Conversion /!,600 x ;$.)01 %6,3%0
&ota# cost /treate as a #oss1 ;$!,!%0
Prob#e"s
3%. a. 3yeth Proucts
Cost o' Prouction Deport
9or the -onth o' 9ebruary %006
Prouction ,ata
+nits -ateria# 5abor 6verhea
Beginning inventory (00
+nits starte 11,$00
+nits to account 'or 1%,%00
Beginning inventory units (00 (00 (00 (00
+nits starte . co"p#ete 11,000 11,000 11,000 11,000
Ening inventory $00 %(0 360 3%0
E+P 1%,%00 1%,0(0 1%,160 1%,1%0
Cost ,ata
&ota# -ateria# 5abor 6verhea
Cost in B4 ; 1$,9$% ; 6,)$( ; %,$($ ; !,)10
Current costs !0!,!3( %!9,01% !(,316 1((,%10
&ota# cost to account 'or ;!%0,$(0 ;%6!,)60 ;60,(00 ;193,9%0
,ivie by E+P 1%,0(0 1%,160 1%,1%0
Cost per E+P ;$3 ;%% ;! ;16
Cost *ssign"ent
&rans'erre out /11,(00 units x ;$31 ;!0),$00
Ening inventory:
-ateria# /%(0 x ;%%1 ;6,160
5abor /360 x ;!1 1,(00
6verhea /3%0 x ;161 !,1%0 13,0(0
&ota# cost accounte 'or ;!%0,$(0
b. DaE -ateria# 4nventory III
*ccounts Payab#e III
34P 4nventory %!9,01%
DaE -ateria# 4nventory %!9,01%
34P 4nventory !(,316
3ages Payab#e !(,316
34P 4nventory 1((,%10
-anu'acturing 6verhea 1((,%10
-anu'acturing 6verhea III
*ccounts Payab#e III
Chapter 6
9inishe Hoos 4nventory !0),$00
34P 4nventory !0),$00
Cost o' Hoos So# III
9inishe Hoos 4nventory III
c. DaE -ateria#s 34P 4nventory
Beg III %!9,01% 4ssue Beg 1$,9$% !0),$00 CH-
Purch III ,- %!9,01%
,5 !(,316
67 1((,%10
En III En 13,0(0
3ages Payab#e 9inishe Hoos
!(,316 ,5 Beg. III III C6HS
CH- !0),$00
En III
-anu'acturing 6verhea *ccounts Payab#e
*ctua# III 1((,%10 *pp#ie III D- Purch
III *ctua# -67
Cost o' Hoos So#
9ro" 9H III
1%$
Chapter 6 1%!
33. a. 3yeth Proucts
Cost o' Prouction Deport
9or the -onth o' 9ebruary %006
Prouction ,ata: +nits -ateria# 5abor 6verhea
Beginning inventory (00
+nits starte 11,$00
+nits to account 'or 1%,%00
Beginning inventory units (00 $$0 %(0 $(0
+nits starte . co"p#ete 11,000 11,000 11,000 11,000
Ening inventory $00 %(0 360 3%0
+nits accounte 'or 1%,%00 11,)%0 11,6$0 11,(00
Cost ,ata: &ota# -ateria# 5abor 6verhea
Cost in B4 ; 1$,9$%
Current costs !0!,!3( ;%!9,01% ;!(,316 ;1((,%10
&ota# cost to account 'or ;!%0,$(0
,ivie by E+P 11,)%0 11,6$0 11,(00
Cost per E+P ;$3.06 ;%%.10 ;!.01
<
;1!.9!
<
roune
Cost *ssign"ent
&rans'erre out:
Beginning 34P ;1$,9$%
Co"p#ete Beginning 34P
-ateria# /$$0 x ;%%.101 9,)%$
5abor /%(0 x ;!.011 1,$03
6verhea /$(0 x ;1!.9!1 ),6!6 ; 33,)%!
Starte . Co"p#ete /11,000 x ;$3.061 $)3,660
Ening inventory:
-ateria# /%(0 ? ;%%.101 ;6,1((
5abor /360 ? ;!.011 1,(0$
6verhea /3%0 ? ;1!.9!1 !,10$ 13,096
&ota# cost accounte 'or /o'' ue to rouning1 ;!%0,$(1
b. &he i''erences that exist betEeen Eeighte average an 9496 process
costing occur because o' the i''erence in the treat"ent o' the EorB
per'or"e in the prior perio on beginning 34P inventory. 3* inc#ues such
EorB in the eter"ination o' e2uiva#ent units o' prouction, Ehereas 9496
oes not. 4n aition, because 3* inc#ues the beginning inventory EorB in
E+P, this "etho a#so inc#ues the cost o' beginning inventory in the
eter"ination o' cost per E+P /Ehereas 9496 exc#ues it1. &hese tEo ite"s
cause the cost per E+P to i''er an, thus, the cost o' the goos trans'erre
out as Ee## as the cost o' ening inventory.
Chapter 6
3$. a. +nits -ateria# Conversion
B4 $00,000
+nits starte %,000,000
+nits to account 'or %,$00,000
B4 $00,000 $00,000 $00,000
+nits S.C 1,$00,000 1,$00,000 1,$00,000
E4 600,000 600,000 300,000
E+P %,$00,000 %,$00,000 %,100,000
b. -ateria# 5abor 6verhea
Cost in B4 ; $00,000 ; !)6,000 ; 3$!,600
Current cost %,600,000 3,%0$,000 1,9%%,$00
&ota# cost to account 'or ;3,000,000 ;3,)(0,000 ;%,%6(,000
,ivie by E+P %,$00,000 %,100,000 %,100,000
Cost per E+P ;1.%! ;1.(0 ;1.0(
&ota# cost to account 'or = ;3,000,000 @ ;3,)(0,000 @ ;%,%6(,000
= ;9,0$(,000
c. &rans'erre out /1,(00,000 ? ;$.131 ;),$3$,000
Ening inventory:
-ateria# /600,000 ? ;1.%!1 ;)!0,000
Conversion /300,000 ? ;%.((1 (6$,000 1,61$,000
&ota# cost accounte 'or ;9,0$(,000
3!. a. /11 -ateria# 5abor 6verhea
B4 units 100,000 100,000 100,000
+nits starte . co"p#ete 1,100,000 1,100,000 1,100,000
E4 unit $00,000 %$0,000 %$0,000
E+P 1,600,000 1,$$0,000 1,$$0,000
/%1 &ota# -ateria# 5abor 6verhea
B4 costs ; 1,11!,!00 ; )!0,000 ; %1!,000 ; 1!0,!00
Current 1%,6%(,!00 !,6!0,000 $,10!,000 %,()3,!00
&ota# ;13,)$$,000 ;6,$00,000 ;$,3%0,000 ;3,0%$,000
,ivie by E+P 1,600,000 1,$$0,000 1,$$0,000
Cost per E+P ;9.10 ;$.00 ;3.00 ;%.10
/31 Beginning 9H ; 0
CH- /1,%00,000 ? ;9.101 10,9%0,000
Hoos avai#ab#e 'or sa#e ;10,9%0,000
Ening inventory /1%$,0001
CHS ;10,)96,000
b. 9inishe Hoos 4nventory 10,9%0,000
3orB in Process 4nventory 10,9%0,000
Cost o' Hoos So# 10,)96,000
9inishe Hoos 4nventory 10,)96,000
36. a. +nits -ateria# Conversion
1%6
Chapter 6 1%)
Beginning inventory !,000
+nits starte (0,$00
+nits to account 'or (!,$00
Beginning inventory in units !,000 0 3,000
+nits starte . co"p#ete )6,$00 )6,$00 )6,$00
Ening inventory $,000 $,000 3,%00
E+P (!,$00 (0,$00 (%,600
b. &ota# -ateria# Conversion
Current cost ;$9!,)1% ;3((,33% ;10),3(0
E+Ps /94961 (0,$00 (%,600
Cost per E+P ;6.13 ;$.(3 ;1.30
c. Beginning inventory costs ;%6,)90
Co"p#ete 34P
CC /3,000 x ;1.301 3,900 ; 30,690
St. . Co"p. /)6,$00 x ;6.131 $6(,33%
Costs trans'erre ;$99,0%%
. ,- /$,000 x ;$.(31 ;19,3%0
CC /3,%00 x ;1.301 $,160
&ota# cost o' E4 ;%3,$(0
3). a. Ha##ons trans'erre out %$%,000
Ha##ons in ening 34P %3,!00
&ota# ga##ons to account 'or %6!,!00
Ha##ons in beginning 34P /36,0001
Ha##ons starte %%9,!00
b. -ateria# 5abor 6verhea
Beginning 34P 0 16,%00 10,(00
Starte . co"p#ete %06,000 %06,000 %06,000
Ening 34P %3,!00 3,!%! %,3!0
E+P 8 9496 %%9,!00 %%!,)%! %19,1!0
-ateria# 5abor 6verhea
Current costs ;1,136,0%! ;$!1,$!0 ;)%3,19!
E+P 8 9496 %%9,!00 %%!,)%! %19,1!0
Cost per E+P ;$.9! ;%.00 ;3.30
Beginning 34P /;1)(,000 @ ;39,100 @ ;(1,)$01 ;%9(,($0
Co"p#etion o' Beginning 34P
,5 /16,%00 x ;%.001 ;3%,$00
CC /10,(00 x ;3.301 3!,6$0 6(,0$0
&ota# cost o' B4 trans'erre ;366,((0
Chapter 6
c. &ota# cost per E+P = ;$.9! @ ;%.00 @ ;3.30 = ;10.%!
&ota# cost o' B4 trans'erre ; 366,((0
Starte . co"p#ete /%06,000 x ;10.%!1 %,111,!00
&ota# cost o' goos co"p#ete ;%,$)(,3(0
. ;%,$)(,3(0 A %$%,000 = ;10.%$ /roune1
e. ,- /%3,!00 ? ;$.9!1 ;116,3%!
,5 /3,!%! ? ;%.001 ),0!0
67 /%,3!0 ? ;3.301 ),)!!
&ota# E4 ;131,130
3(. a. Fi#e Queen Corporation
Cost o' Prouction Deport
9or the -onth o' 6ctober %006
Prouction ,ata:
+nits
Beginning inventory 6,000
+nits starte $!,000
+nits to account 'or !1,000
+nits -ateria# 5abor 6verhea
Beginning inventory in units 6,000 6,000 6,000 6,000
+nits starte . co"p#ete 3!,000 3!,000 3!,000 3!,000
Ening inventory 10,000 10,000 $,000 (,000
E+P /3*1 !1,000 !1,000 $!,000 $9,000
Cost ,ata:
&ota# -ateria# 5abor 6verhea
Cost in B4 ; 9,)(% ; 6,!10 ; 9!$ ; %,31(
Current costs 103,30( $!,000 %%,(96 3!,$1%
Cost to account 'or ;113,090 ;!1,!10 ;%3,(!0 ;3),)30
,ivie by E+P !1,000 $!,000 $9,000
Cost per E+P ;%.31 ;1.01 ;0.!3 ;0.))
Cost *ssign"ent:
&rans'erre out /$1,000 ? ;%.311 ; 9$,)10
Ening inventory:
-ateria# /10,000 ? ;1.011 ;10,100
,irect #abor /$,000 ? ;0.!31 %,1%0
6verhea /(,000 ? ;0.))1 6,160 1(,3(0
&ota# cost accounte 'or ;113,090
1%(
Chapter 6 1%9
b. Fi#e Queen Corporation
Cost o' Prouction Deport
9or the -onth o' 6ctober %006
Prouction ,ata:
+nits
Beginning inventory 6,000
+nits starte $!,000
+nits to account 'or !1,000
+nits -ateria# 5abor 6verhea
Beginning inventory in units 6,000 0 $,%00 %,$00
+nits starte . co"p#ete 3!,000 3!,000 3!,000 3!,000
Ening inventory 10,000 10,000 $,000 (,000
E+P /94961 !1,000 $!,000 $3,%00 $!,$00
Cost ,ata:
&ota# -ateria# 5abor 6verhea
Cost in B4 ; 9,)(%
Current costs 103,30( ;$!,000 ;%%,(96 ;3!,$1%
Cost to account 'or ;113,090
,ivie by E+P $!,000 $3,%00 $!,$00
Cost per E+P ;%.31 ;1.00 ;0.!3 ;0.)(
Cost *ssign"ent:
&rans'erre out:
Beginning 34P ; 9,)(%
Co"p#ete Beginning 34P
,5 /$,%00 ? ;0.!31 %,%%6
67 /%,$00 ? ;0.)(1 1,()% ; 13,((0
Starte . co"p#ete /3!,000 ? ;%.311 (0,(!0
Ening inventory:
-ateria# /10,000 ? ;1.001 ;10,000
,irect #abor /$,000 ? ;0.!31 %,1%0
6verhea /(,000 ? ;0.)(1 6,%$0 1(,360
&ota# cost accounte 'or ;113,090
Chapter 6
39. a. Starbing Paints
Cost o' Prouction Deport
9or -onth Ene -ay 31, IIII
Prouction ata:
Beginning inventory $,000
+nits starte %1,000
+nits to account 'or %!,000
,irect -ateria#s
Che"ica#s Cans Conversion
Beginning inventory $,000 $,000 $,000
Starte . co"p#ete 16,000 16,000 16,000
Ening inventory !,000 0 $,000
E2uiva#ent units %!,000 %0,000 %$,000
Cost ata:
,irect -ateria#s
Che"ica#s Cans Conversion
Beginning inventory ; $!,600 ; 0 ; (,1%!
Current costs %%(,$00 ),000 $!,!00
&ota# costs ;%)$,000 ; ),000 ;!3,6%!
,ivie by E+P %!,000 %0,000 %$,000
Cost per e2uiva#ent unit ;10.96 ;0.3! ;%.%3<
<roune
Cost assign"ent:
Co"p#ete goos /;13.!$ ? %0,0001 ;%)0,(00
Ening 34P
Che"ica#s /!,000 ? ;10.961 ;!$,(00
Conversion /$,000 ? ;%.%31 (,9%0 63,)%0
&ota# costs /o'' ue to rouning1 ;33$,!%0
130
Chapter 6 131
b. Starbing Paints
Cost o' Prouction Deport
9or -onth Ene -ay 31, IIII
Prouction ata:
Beginning inventory $,000
+nits starte %1,000
+nits to account 'or %!,000
,irect -ateria#s
Che"ica#s Cans Conversion
Beginning inventory 0 $,000 3,000
Starte . co"p#ete 16,000 16,000 16,000
Ening inventory !,000 0 $,000
E2uiva#ent units %1,000 %0,000 %3,000
Cost ata:
,irect -ateria#s
Che"ica#s Cans Conversion
-ay costs incurre ;%%(,$00 ; ),000 ;$!,!00
,ivie by E+P %1,000 %0,000 %3,000
Costs per e2uiva#ent unit ;10.((< ;0.3! ;1.9(<
<roune
Cost assign"ent:
Co"p#ete goos:
Beg. 34P ;!3,)%!
Co"p#ete Beg. 34P
Cans /$,000 ? ;.3!1 1,$00
CC /3,000 ? ;1.9(1 !,9$0 ; 61,06!
Starte . co"p#ete /16,000 ? ;13.%11 %11,360 ;%)%,$%!
Ening 34P
Che"ica#s /!,000 ? ;10.((1 ;!$,$00
Conversion /$,000 ? ;1.9(1 ),9%0 6%,3%0
&ota# costs /o'' ue to rouning1 ;33$,)$!
c. &he Eeighte average "etho is genera##y easier to use because the
ca#cu#ations are si"p#er. 7oEever, this "etho tens to obscure current perio
costs because the cost per e2uiva#ent unit inc#ues both current costs an
prior costs that Eere in the beginning inventory. &his "etho is "ost
appropriate Ehen conversion costs, inventory #eve#s, an raE "ateria# prices
are stab#e.
Chapter 6
&he 9496 "etho is base on the EorB one in the current perio on#y.
&his "etho is "ost appropriate Ehen conversion costs, inventory #eve#s,
or raE "ateria# prices '#uctuate. &his "etho shou# a#so be use Ehen
accuracy in current e2uiva#ent unit costs is i"portant or Ehen a stanar
cost syste" is use.
/C-* aapte1
$0. Iena Corp. Curing ,ept.
Cost o' Prouction Deport
9or the -onth Ene -ay 31, %006
Prouction ,ata:
+nits &4 ,- ,5 67
Beginning inventory (,000
+nits starte $0,000
+nits to account 'or $(,000
&o co"p#ete B4 (,000 0 1,600 $,(00 !,600
Starte . co"p#ete 36,000 36,000 36,000 36,000 36,000
Ening inventory $,000 $,000 %,(00 %,000 1,600
+nits accounte 'or $(,000 $0,000 $0,$00 $%,(00 $3,%00

Cost ,ata:
&ota# &4 ,- ,5 67
Cost in B4 ; %06,010
Current costs 1,30(,000 ;)60,000 ;161,600 ;%!6,(00 ;1%9,600
&ota# to acct. 'or ;1,!1$,010
,ivie by E+P $0,000 $0,$00 $%,(00 $3,%00
Cost per E+P ;3% ;19 ;$ ;6 ;3
Cost *ssign"ent:
&rans'erre out:
Beginning inventory ; %06,010
Co"p#ete B4
,- /1,600 ? ;$1 ; 6,$00
,5 /$,(00 ? ;61 %(,(00
67 /!,600 ? ;31 16,(00 !%,000
S . C /36,000 ? ;3%1 1,1!%,000 ;1,$10,010
Ening inventory:
&4 /$,000 ? ;191 ;)6,000
,- /%,(00 ? ;$1 11,%00
,5 /%,000 ? ;61 1%,000
67 /1,600 ? ;31 $,(00 10$,000
&ota# cost accounte 'or ;1,!1$,010
/CP* aapte1
13%
Chapter 6 133
$1. a. Big Piney Corp. Cutting ,ept.
Cost o' Prouction Deport
9or the -onth Ene 6ctober 31, %006
Prouction ,ata:
+nits
Beginning inventory (,000
+nits starte 36,000
+nits to account 'or $$,000
+nits -ateria# Conversion
Beginning inventory in units (,000 (,000 (,000
+nits starte . co"p#ete 3%,$00 3%,$00 3%,$00
Ening inventory 3,600 3,600 %,!%0
E+P $$,000 $$,000 $%,9%0
Cost ,ata:
&ota# -ateria# Conversion
Cost in beginning inventory ; 93,%!0 ; )3,%!0 ; %0,000
Current costs 66(,110 3$$,)!0 3%3,360
&ota# cost to account 'or ;)61,360 ;$1(,000 ;3$3,360
,ivie by E+P $$,000 $%,9%0
Cost per E+P ;1).!0 ;9.!0 ;(.00
Cost *ssign"ent:
&rans'erre out /$0,$00 ? ;1).!01 ;)0),000
Ening inventory:
-ateria# /3,600 ? ;9.!01 ;3$,%00
Conversion /%,!%0 ? ;(.001 %0,160 !$,360
&ota# cost accounte 'or ;)61,360
Chapter 6
b. Big Piney Corp. Boxing ,ept.
Cost o' Prouction Deport
9or the -onth Ene 6ctober 31, %006
Prouction ,ata:
+nits &rans. 4n -ateria# Conversion
Beginning inventory %,!00
+nits starte $0,$00
+nits to account 'or $%,900
B4 %,!00 %,!00 %,!00 %,!00
+nits S . C 39,%00 39,%00 39,%00 39,%00
Ening inventory 1,%00 1,%00 0 )%0
+nits accounte 'or $%,900 $%,900 $1,)00 $%,$%0
Cost ,ata:
&ota# &rans. 4n -ateria# Conversion
Cost in B4 ; $3,)0! ; $1,60! ; 0 ; %,100
Current costs (6$,$$0 )0),000 9!,910 61,!30
&ota# to acct. 'or ;90(,1$! ;)$(,60! ;9!,910 ;63,630
,ivie by E+P $%,900 $1,)00 $%,$%0
Cost per E+P ;%1.%! ;1).$! ;%.30 ;1.!0

Cost *ssign"ent:
&rans'erre out /$1,)00 ? ;%1.%!1 ;((6,1%!
Ening inventory:
&rans'erre in /1,%00 ? ;1).$!1 ;%0,9$0
Conversion /)%0 ? ;1.!01 1,0(0 %%,0%0
&ota# cost accounte 'or ;90(,1$!
$%. a. Striping ,ept.:
Beginning inventory ; %0,000
Current costs:
,- 90,000
,5 (0,000
67 /;(0,000 ? 0.(1 6$,000
&ota# ;%!$,000
5ess ening inventory /1),0001
Costs trans'erre to *hesion ;%3),000
13$
Chapter 6 13!
b. *hesion ,ept.: /#et CC = conversion costs1
B4 @ &4 @ ,- @ CC > &6 = E4
;)0,000 @ ;%3),000 @ ;%%,600 @ CC 8 ;$(0,000 = ;%0,600
CC 8 ;1!0,$00 = ;%0,600
CC = ;1)1,000
,5 @ 67 = CC
,5 @ 0.(,5 = CC
1.(,5 = ;1)1,000
,5 = ;9!,000
67 = ;9!,000 x 0.(0 = ;)6,000
c. Cost o' goos "anu'acture is e2ua# to the cost o' goos trans'erre into
9inishe Hoos /;((0,0001.
67 = 0.(,5
;90,000 = 0.(,5
,5 = ;11%,!00
B4 @ &4 @ ,- @ ,5 @ 67 > CH- = ;$0,000
;1!0,000 @ ;$(0,000 @ ,- @ ;11%,!00 @ ;90,000 8 ;((0,000 = ;$0,000
,- 8 ;$),!00 = ;$0,000
,- = ;(),!00
. 34P 8 *hesion %3),000
34P 8 Striping %3),000
34P 8 PacBaging $(0,000
34P 8 *hesion $(0,000
9inishe Hoos 4nventory ((0,000
34P 8 PacBaging ((0,000
Cost o' Hoos So# )%0,000
9inishe Hoos 4nventory )%0,000
$3. a. Cutting Process:
+nits -ateria# Conversion
Beginning inventory 1,300
+nits starte $,(00
+nits to account 'or 6,100
Beginning inventory co"p#ete 1,300 %60 3%!
+nits starte . co"p#ete 3,)00 3,)00 3,)00
Ening inventory 1,100 $$0 %%0
E+P /94961 6,100 $,$00 $,%$!
Chapter 6
Pressure Process:
+nits &rans. 4n -ateria# Conversion
Beginning inventory 900
+nits starte !,000
+nits to account 'or !,900
B4 co"p#ete 900 0 900 360
+nits S . C 3,600 3,600 3,600 3,600
Ening inventory 1,$00 1,$00 0 !60
E+P /94961 !,900 !,000 $,!00 $,!%0
b.
Cutting Process:
&ota# -ateria# Conversion
Cost in beginning inventory ;16,06!
Current costs !6,$%! ;3!,%00 ;%1,%%!
&ota# cost to account 'or ;)%,$90
,ivie by E+P $,$00 $,%$!
Cost per E+P ;13 ;( ;!
c. Cost trans'erre out o' Cutting /94961:
Cost o' B4 ;16,06!
Cost to co"p#ete B4
-ateria# /%60 x ;(1 ; %,0(0
Conversion /3%! x ;!1 1,6%!
S.C /3,)00 x ;131 $(,100 !1,(0!
&ota# cost o' goos trans'erre ;6),()0
Ening 34P:
,- /$$0 x ;(1 ; 3,!%0
CC /%%0 x ;!1 1,100 $,6%0
&ota# ;)%,$90
. Cost per E+P:
&ota# &rans. 4n -ateria# Conversion
Cost in B4 ;13,!1$
Current costs ($,10% ;6),()0 ;$,93% ;11,300
&ota# ;9),616
,ivie by E+P !,000 $,!00 $,!%0
Cost per E+P ;1).1) ;13.!)$ ;1.096 ;%.!0
136
Chapter 6 13)
e. Cost *ssign"ent:
&rans'erre out
Beginning inventory cost ;13,!1$.00
Cost to co"p#ete:
-ateria# /900 ? ;1.0961 9(6.$0
Conversion /360 ? ;%.!01 900.00 ;1!,$00.$0
+nits S.C /3,600 ? ;1).1)1 61,(1%.00
&ota# cost trans'erre out ;)),%1%.$0
Ening inventory:
&rans'erre in /1,$00 ? ;13.!)$1 ;19,003.60
Conversion /!60 ? ;%.!01 1,$00.00 %0,$03.60
Cost accounte 'or ;9),616.00
'. Because there Eas no beginning or ening 9H 4nventory, cost o' goos
so# is e2ua# to cost o' goos "anu'acture /trans'erre to 9H1 'or the
perio. &hus, CHS = ;)),%1%.$0.
$$. a. +nits -ateria# Conversion
Beginning inventory 10,000
+nits starte 1(0,000
+nits to account 'or 190,000
Beginning inventory co"p#ete 10,000 0 3,000
+nits starte . co"p#ete 1!0,000 1!0,000 1!0,000
+nits co"p#ete 160,000
Ening inventory 30,000 30,000 1(,000
E+P 190,000 1(0,000 1)1,000
Chapter 6
b. ,arB 6ut
Cost o' Prouction Deport
9or the -onth o' -ay %006
Prouction ,ata:
+nits -ateria# Conversion
Beginning inventory 10,000
+nits starte 1(0,000
+nits to account 'or 190,000
Beginning inventory co"p#ete 10,000 0 3,000
+nits starte . co"p#ete 1!0,000 1!0,000 1!0,000
Ening inventory 30,000 30,000 1(,000
E+P 190,000 1(0,000 1)1,000
Cost ,ata /a## at stanar1:
&ota# -ateria# Conversion
B4: ,- /10,000 x ;!.!01 ; !!,000 ; !!,000
CC /),000 x ;1%.!01 (),!00 ; (),!00
Current costs
,- /1(0,000 x ;!.!01 990,000 990,000
CC /1)1,000 x ;1%.!01 %,13),!00 %,13),!00
&ota# cost to account 'or ;3,%)0,000 ;1,0$!,000 ;%,%%!,000
Cost *ssign"ent
&rans'erre out /160,000 ? ;1(1 ;%,((0,000
Ening inventory:
-ateria# /30,000 ? ;!.!01 ;16!,000
Conversion /1(,000 ? ;1%.!01 %%!,000 390,000
&ota# costs assigne ;3,%)0,000
c. &ota# variance = &ota# actua# cost 8 &ota# stanar cost
= ;3,1%6,000 8 ;3,1%),!00
= ;1,!00 'avorab#e
-ateria#:
Current actua# cost ; 9(1,000
Stanar cost /1(0,000 ? ;!.!01 /990,0001
,irect "ateria# variance ; /9,0001 'avorab#e
Conversion:
Current actua# cost ;%,1$!,000
Stanar cost /1)1,000 ? ;1%.!01 /%,13),!001
Conversion cost variance ; ),!00 un'avorab#e
,irect "ateria# variance 9,000
Conversion cost variance ),!00
Cost o' Hoos So# 1,!00
$!. a. Extrusion 9or" &ri" 9inish
+nits prouce 16,000 11,000 !,000 %,000
13(
Chapter 6 139
-ateria# costs ;19%,000 ; $$,000 ;1!,000 ;1%,000
+nit cost ;1%.00 ;$.00 ;3.00 ;6.00
Conversion costs
<
;39%,000 ;13%,000 ;69,000 ;$%,000
+nit cost ;%$.!0 ;1%.00 ;13.(0 ;%1.00
<
,irect #abor an 'actory overhea
P#astic Stanar ,e#uxe Executive
+nit costs: Sheets -oe# -oe# -oe#
Extrusion "ateria# ;1%.00 ;1%.00 ;1%.00 ;1%.00
9or" "ateria# 8 $.00 $.00 $.00
&ri" "ateria# 8 8 3.00 3.00
9inish "ateria# 8 8 8 6.00
Extrusion conversion %$.!0 %$.!0 %$.!0 %$.!0
9or" conversion 8 1%.00 1%.00 1%.00
&ri" conversion 8 8 13.(0 13.(0
9inish conversion 8 8 8 %1.00
&ota# unit cost ;36.!0 ;!%.!0 ;69.30 ;96.30
&i"es units prouce x !,000 x 6,000 x 3,000 x %,000
&ota# prouct cost ;1(%,!00 ;31!,000 ;%0),900 ;19%,600
b. E2uiva#ent +nits
-ateria# Conversion
Entering tri" operation: 0 Qty. 0 Qty.
%,000 ,e#uxe units 100 %,000 100 %,000
1,000 ,e#uxe units 100 1,000 60 600
%,000 Executive units 100 %,000 100 %,000
&ota# e2uiva#ent units !,000 $,600
,e#uxe "oe# 34P costs: +nit Cost &ota# Costs
Extrusion "ateria# ;1%.00 ;1%,000
9or" "ateria# $.00 $,000
&ri" "ateria# /10001 3.00 3,000
Extrusion conversion %$.!0 %$,!00
9or" conversion 1%.00 1%,000
&ri" conversion /6001 9.00
<
9,000
<
3orB8in8process costs ;6$.!0 ;6$,!00
<
Conversion cost = /;30,000 @ ;39,0001 A $,600 = ;1! per e2uiva#ent unit.
/C-* aapte1
$6. a. Beginning pouns 1,000
Starte 1%!,000
Pouns to account 'or 1%6,000
Pouns trans'erre /119,1001
Pouns in E4 /3,0001
Chapter 6
Pouns o' shrinBage 3,900
b. For"a# shrinBage = 1%!,000 ? 0.03 = 3,)!0 pouns
9or accounting purposes, nor"a# shrinBage is si"p#y ignore, Ehich
"eans its costs Ei## be sprea over a## goo units prouce.
c. *bnor"a# shrinBage = 3,900 > 3,)!0 = 1!0 pouns
&he cost o' abnor"a# shrinBage is treate as a #oss o' the perio.
. &ota# -ateria# Conversion
Beginning inventory 1,000
Starte 1%!,000
&o account 'or 1%6,000
Beginning inventory 1,000 1,000 1,000
Starte an co"p#ete 11(,100 11(,100 11(,100
Ening inventory 3,000 3,000 900
For"a# spoi#age 3,)!0
*bnor"a# spoi#age 1!0 1!0 1!0
E+P /3*1 1%6,000 1%%,%!0 1%0,1!0
e. &ota# -ateria# Conversion
Beginning 34P costs ; 1,0%( ; 9!3 ; )!
Current costs 1%!,90% 113,96% 11,9$0
&ota# costs ;1%6,930 ;11$,91! ; 1%,01!
,ivie by E+P 1%%,%!0 1%0,1!0
Cost per E+P ;1.0$ ;0.9$ ;0.10

&rans'erre out /119,100 ? ;1.0$1 ;1%3,(6$
Ening inventory:
-ateria# /3,000 ? ;0.9$1 ;%,(%0
Conversion /900 ? ;0.101 90 %,910
*bnor"a# spoi#age /1!0 ? ;1.0$1 1!6
&ota# cost accounte 'or ;1%6,930
'. &he easiest Eay to ecrease shrinBage #oss is to buy higher 2ua#ity
"ateria# at a higher input cost per poun. 7igher 2ua#ity groun bee' Eou#
have a #oEer 'at content an conse2uent#y Eou# shrinB #ess. 7oEever,
because o' the reuce shrinBage, the cost o' conversion per poun o'
'inishe prouct "ight ec#ine an the co"pany Eou# probab#y be ab#e to
se## its prouct at a higher price.
$). -axi"u" nor"a# spoi#age = )0,000 ? 0.03 = %,100 units
Dobbin ,arre## Co"pany
Cost o' Prouction Deport
9or the -onth Ene -ay 31, %006
+nits -ateria# Conversion
1$0
Chapter 6 1$1
Beginning inventory !,600
+nits starte )$,$00
+nits to account 'or (0,000
B4 co"p#ete !,600 0 %,(00
+nits S . C 6$,$00 6$,$00 6$,$00
Ening inventory ),!00 ),!00 %,!00
For"a# spoi#age %,100 %,100 %,100
*bnor"a# spoi#age $00 $00 $00
E+P /94961 (0,000 )$,$00 )%,%00
&ota# -ateria# Conversion
Beg. inventory cost ; ),63%
Current costs 106,16( ;)$,$00 ;31,)6(
&ota# costs ;113,(00
,ivie by E+P )$,$00 )%,%00
Cost per E+P ;1.$$ ;1.00 ;0.$$
Cost *ssign"ent:
Beginning inventory cost ; ),63%
Cost to co"p#ete
Conversion /%,(00 ? ;0.$$1 1,%3%
&ota# cost o' B4 ; (,(6$
Starte . co"p. /6$,$00 ? ;1.$$1 9%,)36
For"a# spoi#age
,-: /%,100 ? ;11 ;%,100
CC: /%,100 ? ;0.$$1 9%$ 3,0%$ ;10$,6%$
Ening inventory:
-ateria# /),!00 ? ;11 ; ),!00
Conversion /%,!00 ? ;0.$$1 1,100 (,600
*bnor"a# spoi#age
-ateria# /$00 ? ;11 ; $00
Conversion /$00 ? ;0.$$1 1)6 !)6
&ota# costs accounte 'or ;113,(00
Chapter 6
$(. Dobbin ,arre## Co"pany
Cost o' Prouction Deport
9or the -onth Ene -ay 31, %006
+nits -ateria# Conversion
Beginning inventory !,600
+nits starte )$,$00
+nits to account 'or (0,000
B4 co"p#ete !,600 !,600 !,600
+nits S . C 6$,$00 6$,$00 6$,$00
Ening inventory ),!00 ),!00 %,!00
For"a# spoi#age %,100 %,100 %,100
*bnor"a# spoi#age $00 $00 $00
+nits accounte 'or (0,000 (0,000 )!,000
&ota# -ateria# Conversion
Beg. inventory cost ; ),63% ; 6,$00 ; 1,%3%
Current costs 106,16( )$,$00 31,)6(
&ota# costs ;113,(00 ;(0,(00 ;33,000
,ivie by E+P (0,000 )!,000
Cost per E+P ;1.$! ;1.01 ;0.$$
Cost *ssign"ent:
+nits co"p#ete /)0,000 ? ;1.$!1 ;101,!00
For"a# spoi#age
,-: /%,100 ? ;1.011 ;%,1%1
CC: /%,100 ? ;0.$$1 9%$ 3,0$! ;10$,!$!
Ening inventory:
-ateria# /),!00 ? ;1.011 ; ),!)!
Conversion /%,!00 ? ;0.$$1 1,100 (,6)!
*bnor"a# spoi#age
-ateria# /$00 ? ;1.011 ; $0$
Conversion /$00 ? ;0.$$1 1)6 !(0
&ota# costs accounte 'or ;113,(00
1$%
Chapter 6 1$3
$9. a. She##ey Brian &oo#s Hrining ,epart"ent
Cost o' Prouction Deport
9or the -onth Ene *ugust 31, %006
+nits
B4 1,000
&rans'erre in !0,(00
+nits to account 'or !1,(00
+nits &rans. 4n -ateria# 5abor 67
B4 1,000 1,000 1,000 1,000 1,000
+nits S . C $(,000 $(,000 $(,000 $(,000 $(,000
Ening inventory 1,(00 1,(00 0 )%0 1,1)0
For"a# spoi#age 6!0 6!0 0 6!0 6!0
*bnor"a# spoi#age 3!0 3!0 0 3!0 3!0
E+P /3*1 !1,(00 !1,(00 $9,000 !0,)%0 !1,1)0
&ota# &rans. 4n -ateria# 5abor 67
B4 cost ; ),3!! ; 6,0!0 ; 0 ; 3%! ; 9(0
Current costs %3!,!!) $9,3!0 1%,%!0 %3,)6) !0,190
&ota# costs ;%$%,91% ;1!!,$00 ;1%,%!0 ;%$,09% ;!1,1)0
,ivie by E+P !1,(00 $9,000 !0,)%0 !1,1)0
Cost per E+P ;$.)%! ;3.00 ;0.%! ;0.$)! ;1.00
Cost *ssign"ent:
&rans'erre out:
Hoo units /$9,000 ? ;$.)%!1 ;%31,!%!
For"a# spoi#age /6!0 ? ;$.$)!1 %,909 ;%3$,$3$
Ening inventory:
&rans'erre in /1,(00 ? ;3.001 ; !,$00
5abor /)%0 ? ;0.$)!1 3$%
6verhea /1,1)0 ? ;1.001 1,1)0 6,91%
*bnor"a# spoi#age /3!0 ? ;$.$)!1 1,!66
&ota# costs accounte 'or ;%$%,91%
b. 5oss on *bnor"a# Spoi#age 1,!66
3orB in Process 8 Hrining 1,!66
!0. a. Beginning inventory 3,000
&rans'erre in $!,000
+nits to account 'or $(,000
&rans'erre out $0,000
Ening inventory $,000
BiBes #ost $,000
+nits accounte 'or $(,000
/11 BiBes passing through *sse"b#y $(,000
-inus biBes in E4 /have not reache the
inspection point so there is no Eay
to eter"ine acceptabi#ity1 /$,0001
Chapter 6
BiBes reaching the inspection point $$,000
For"a# e'ective rate x 0.0!
For"a# nu"ber o' e'ective biBes %,%00
/%1 &ota# biBes #ost $,000
For"a# nu"ber o' e'ective biBes /%,%001
*bnor"a# nu"ber o' e'ective biBes 1,(00
b. +nits &rans. 4n -ateria# Conversion
&rans'erre out $0,000 $0,000 $0,000 $0,000
Ening inventory $,000 $,000 %,000 (00
For"a# #oss %,%00 %,%00 %,%00 %,%00
*bnor"a# #oss 1,(00 1,(00 1,(00 1,(00
E+P /3*1 $(,000 $(,000 $6,000 $$,(00
c. &ota# &rans. 4n -ateria# Conversion
B4 ; 10%,)90 ; (%,%00 ; 6,660 ; 13,930
Current 1,!)6,0)0 1,%3),(00 96,($0 %$1,$30
&ota# cost ;1,6)(,(60 ;1,3%0,000 ;103,!00 ;%!!,360
,ivie by E+P $(,000 $6,000 $$,(00
Cost per E+P ;3!.$! ;%).!0 ;%.%! ;!.)0
. /11 For"a# e'ective biBes: %,%00 x ;3!.$! = ;)),990
/%1 *bnor"a# e'ective biBes: 1,(00 x ;3!.$! = ;63,(10
/31 Hoo biBes co"p#ete: $0,000 x ;3!.$! = ;1,$1(,000
/$1 Ening 34P
&rans'erre8in /$,000 x ;%).!01 ;110,000
-ateria# /%,000 x ;%.%!1 $,!00
Conversion /(00 x ;!.)01 $,!60
&ota# ;119,060
e. &ota# cost trans'erre = Cost o' goo biBes @ For"a# spoi#age cost =
;1,$1(,000 @ ;)),990 = ;1,$9!,990 /or an average cost per biBe o' ;3).$01
'. For"a# spoi#age cost is an expecte cost o' proucing goo units. *s such,
it is not an extra cost but thought to be inherent in proucing goo units.
For"a# spoi#age "ay occur because o' "ateria# or #abor 2ua#ity, "achine
"a#'unctions, or hu"an error. -anage"ent shou# o cost=bene'it stuies
to eter"ine i' it is econo"ica##y sensib#e to reuce spoi#age. &hree
2uestions shou# be aresse: /11 3hat oes the spoi#age actua##y costJ
/%1 3hy oes it occurJ /31 7oE can it be contro##eJ
/C-* aapte1
1$$