1) The Spangle Company uses the process cost system and average costing.

The following
prediction data are for the month of July: Production Costs Work in process, beginning of month
Materials $2,500 Labor 1,200 Factory Overhead 1,100 $4800 Costs incurred during the month
Materials $13,500 Labor 9,200 Factory overhead 8,500 31,200 $36,000 Production Report Units
In process, beginning of m onth 500 Finished and transferred during the month 3,800 Work in
process, end of month 400 Stage of completion 50% prepare a cost of production summary for
the month?
Production Cost Report Average Cost Method
For the Month of
Quantity Schedule
Quantities
Physical Units
Units to be accounted for
Work in Process, Beginning
Started into Production
Total Units
Units Accounted for
Transferred Out
WIP, Ending
Total Units
Cost per Equivalent Unit
Unit Costs
WIP
Costs in Month
Total Cost
Equivalent Units
Unit Costs
Cost Reconciliation Schedule
Costs to be accounted for
WIP, Beginning
Started into Production
Total Costs
Costs Accounted for
Transferred out
Work in process, Ending
Material
Labor
Overhead
Total WIP
Total costs

Equivalent Units
Material
Labor

500
3,700
4,200
3,800
400
4,200

3,800
200
4,000

3,800
200
4,000

Material
2,500
13,500
16,000
4,000
4.00

Labor
1,200
9,200
10,400
4,000
2.60

Overhead
1,100
8,500
9,600
4,000
2.40

4,800
31,200
36,000
34,200
800
520
480
1,800
36,000

2) The Following data is for a production company: Beginning inventory 1,000 units, threefourths completed Finished and transferred 16,000 units Work in process, end of month 2,000
units, one half completed Assume that materials, labor, and factory overhead are added evenly

throughout the process. On a separate sheet of paper, complete the following problems. Label
each answer carefully and show all your work. a. Using the average cost method, compute the
equivalent production. b. Using the first-in, first-out method, compute the equivalent production.
c. During the month, Department B received 10,000 units from department a with a unit cost of
$10; 2,00 of these unit were lost during production in Department B. Determine the adjusted cost
of these units. d. During the month, Department 2 received 8,000 from department 1 with a unit
cost of $15. Department 2 added materials that increased the number of units by 50%. Determine
the adjusted cost of these units.
a)
Quantity Schedule
Physical
Units

Quantities

Equivalent Units
Overhea
Material

Labor

Units to be accounted for

1,00
Work in Process, Beginning

0
17,00

Started into Production

Total Units
Units Accounted for

18,00
16,00
Transferred Out

16,00
0

2,00
WIP, Ending

Total Units

16,00
0

1,00

00
1,00

0
18,00

16,0

0
17,00

1,0
00

17,00

17,0
00

b)
Quantity Schedule
Units to be Accounted for
1,00
Beginning Work in Process

0
17,00

Started into Production

0
18,00

Total Units in Production

Units Accounted for

0
Material Labor

Transferred Out
From Beginning WIP

1,00

25

25

Overhead
25

0
15,00

Started and Completed

Ending WIP

Equivalent Units

0
15,0

00
2,00

15,0
00

1,00
0

18,00

0
1,00

0
16,2

50

15,00
0
1,00
0

16,2
50

16,25
0

c)
Total cost = 10,000 units X $10 = $100,000
Units available = 10,000-2,000=8,000
Adjusted cost = 100,000/8,000 = $12.5 per unit
d)
Cost received = 8,000X15 = $120,000
Units in Department 2 = 8,000 X1.5 = 12,000
Adjusted cost = 120,000/12,000=$10 per unit
3) A Plant uses process costing has 8,000 units in beginning work in process, 15,000 more
started, and 5,000 units in the ending work in process. Using this information, answer the
following questions on a separate sheet of paper. Label each answer carefully and show all of
your work. a. How many units are there to account for? b. How many units are transferred using
the average cost method? c. How many units are transferred using the first-in, first-out method?
d. How many units were both started and completed during the period?
a)
Units to account for
Units in beginning inventory
Units started
Total units to account for

8,000
15,000
23,000

b)
Units transferred = units to account for units in ending inventory
= 23,000-5,000 = 18,000 units
c)
Units transferred remain the same at 18,000 units

d)
Units transferred are 18,000
Units from beginning inventory = 8,000
Units started and completed = 18,000-8,000=10,000
4) Cost of production summary, three departments; change in unit
cost from prior department; department cost work sheet; journal
entries; manufacturing statement
Taguchi Manufacturing Co. uses the process cost system. The
following information for the month of December was obtained from
the company's book and from the production reports submitted by
the department heads:
Production Report &nbs p; Mixing Blending Bottling
Units in process, beginning of period &nbs p; 2,500 1,500 3,000
Started in process during the month 12,500
Received from prior department &nb sp; 13,000 10,000
Finished and transferred &nb sp; 13,000 10,000 11,000
Finished and on hand 500
Units in process, end of period 2,000 4,000 2,000
Stage of completion &n bsp; 4/5
Production Costs
Work in process, beginning of period:
Cost in Mixing .......................................... &n bsp;
$3,075 $6150
Materials ............................................... $1470
Labor ....................................................... 650
Factory overhead ................................. 565
Cost in Blending .......................................... 3,660
Materials .......................................... &n bsp; 240
Labor .......................................... &nb sp; 905
Factory overhead ..................... & nbsp; 750
Cost in Bottling
Materials ................................. &nbs p; 900
Labor .......................................... &n bsp; 3,100
Factory overhead..................... &n bsp; 3,080
Cost incurred during the month:
Materials .......................................... 15,000 2,500
1,500
Labor .......................................... 4,750 &nb sp;
8,000 6,500
Factory overhead ..................... 5,240 & nbsp; 6,100 7,000
TOTAL ................................................. $27,675
$21,570 $31,890
Required:

1. Prepare Costs of production summaries for the mixing,

blending, and Bottling departments.
2. Prepare a departmental cost work sheet.
3. Draft the journal entries required to record the month's
operations.
4. Prepare a statement of cost of goods manufactured for
December.
1.
Taguchi Manufacturing Co.
Cost of Production SummaryMixing
For the Month Ended December 31, 20-Cost of work in process, beginning of month:
Materials...................................................................................
Labor.........................................................................................
Factory overhead.....................................................................
Cost of production for month:
Materials...................................................................................
Labor.........................................................................................
Factory overhead.....................................................................

1,470
650
565

$ 15,000
4,750
5,240

Total costs to be accounted for.........................................

24,990
$ 27,675

Unit output for month:

Finished and transferred to Blending during month............
Equivalent units of work in process, end of month
(2,000 units, one-fourth completed).................................

13,000
500

Total equivalent production.............................................

13,500

Unit cost for month:

Materials ($1,470 + $15,000) 13,500....................................
Labor ($650 + $4,750) 13,500...............................................
Factory overhead ($565 + $5,240) 13,500...........................
Total....................................................................................
Inventory costs:
Costs of goods finished and transferred to Blending
during month (13,000 $2.05).........................................
Cost of work in process, end of month:
Materials (2,000 1/4 $1.22).........................................
Labor (2,000 1/4 $0.40)...............................................
Factory overhead (2,000 1/4 $0.43)...........................
Total production costs accounted for.............................................

2,685

1.22
.40
.43

2.05

$ 26,650
$

610
200
215

1,025
$ 27,675

Taguchi Manufacturing Co.

Cost of Production SummaryBlending
For the Month Ended December 31, 20-Cost of work in process, beginning of month:
Cost in Mixing..........................................................................
Cost in Blending:
Materials................................................................
$ 240
Labor......................................................................
905
Factory overhead..................................................
750

3,075

1,895

Cost of goods received from Mixing during month......................

Cost of production for month:
Materials...................................................................................
Labor .......................................................................................
Factory overhead.....................................................................

26,650
$

2,500
8,000
6,100

Total costs to be accounted for........................................................

16,600
$ 48,220

Unit output for month:

Finished and transferred to Bottling during month.............
Finished and on hand...............................................................
Equivalent units of work in process, end of month
(4,000 units, four-fifths completed).................................

10,000
500
3,200

Total equivalent production............................................................

13,700

Unit cost for month:

Materials ($240 + $2,500) 13,700.........................................
Labor ($905 + $8,000) 13,700...............................................
Factory overhead ($750 + $6,100) 13,700...........................
Total....................................................................................
Inventory costs:
Costs of goods finished and transferred to Bottling
during month:
Cost in Mixing
(10,000 $2.05)..........................
Cost in Blending (10,000 1.35)..........................
(10,000 $3.40)..........................
Cost of goods finished and on hand:
Cost in Mixing
(500 $2.05).....................................
Cost in Blending (500 1.35).....................................
(500 $3.40).....................................

4,970

0.20
.65
.50

1.35

$ 20,500
13,500
$ 34,000
$

1,025
675
1,700

Cost of work in process, end of month:

Cost in Mixing (4,000 $2.05).........................................
Cost in Blending:
Materials (4,000 4/5 $0.20).......................
$ 640
Labor (4,000 4/5 $0.65).............................
2,080
Factory overhead (4,000 4/5 $0.50).........
1,600

8,200

4,320

Total production costs accounted for.............................................

12,520
$ 48,220

Taguchi Manufacturing Co.

Cost of Production SummaryBottling
For the Month Ended December 31, 20-Cost of work in process, beginning of month:
Cost in Mixing..........................................................................
Cost in Blending.......................................................................

$
$

Cost in Bottling:
Materials.......................................................................
Labor ...........................................................................
Factory overhead.........................................................

900
3,100
3,080

Cost of goods received from Blending............................................

Cost of production for month:
Materials...................................................................................
Labor .......................................................................................
Factory overhead.....................................................................

6,150
3,660
9,810

7,080

$ 16,890
34,000

1,500
6,500
7,000

Total costs to be accounted for........................................................

15,000
$ 65,890

Unit output for month:

Finished and transferred to finished goods...........................
Equivalent units of work in process, end of month
(2,000 units, one-half completed).....................................
Total equivalent production.............................................
Unit cost for month:
Cost from preceding department:*
Beginning inventory
Goods received during month
Average unit cost for goods

(3,000)......................
(10,000)......................
(13,000)......................

Cost in Bottling:
Materials ($900 + $1,500) 12,000..................................
Labor ($3,100 + $6,500) 12,000.....................................
Factory overhead ($3,080 + $7,000) 12,000..................
Total....................................................................................

11,000
1,000
12,000

9,810
34,000
$ 43,810

3.37

0.20
.80
.84

1.84

Inventory costs:
Costs of goods finished and transferred:
Cost in Mixing and Blending (11,000 $3.37)...........
Cost in Bottling
(11,000 1.84)...........
(11,000 $5.21)...........
Cost in work in process, end of month:
Cost in Mixing and Blending (2,000 $3.37).................
Cost in Bottling:
Materials (2,000 1/2 $0.20).......................
$ 200
Labor (2,000 1/2 $0.80).............................
800
Factory overhead (2,000 1/2 $0.84).........
840

$ 37,070
20,240
$ 57,310
$

6,740

1,840

Total production costs accounted for.....................................

8,580
$ 65,890

*Alternative calculation.
Detailed calculation of the average unit costs from other departments as follows:

Units in process, beginning of month.................................

Units received during month...............................................

Units
3,000
10,000

Cost from
Mixing Blending
$ 6,150 $ 3,660
20,500
13,500

Total.......................................................................................

13,000

$ 26,650

$ 17,160

Unit cost................................................................................

2.05

1.32

2.

Analysis

Taguchi Manufacturing Co.

Departmental Cost Work Sheet
For the Month Ended December 31, 20-Cost
Units
Units
per Unit
Received
Transf. or
Transf.
in Dept.
on Hand

Mixing:
Opening inventory in
process.................
Started in process......
Costs for month:
Materials...............
Labor....................
Factory Overhead
Finished and transferred to Blending

2,500
12,500

$1.22
.40
.43
$2.05

Amount
Charged
to Dept.

Amount
Credited
to Dept.

2,685

15,000
4,750
5,240
13,000

$ 26,650

Closing work in
process..................
Total......................

15,000

Blending:
Opening inventory in
process..................
Received during
month from
Mixing
Costs added during
month:
Materials...............
Labor....................
Factory overhead
Finished and transferred to Bottling.
Completed and on
hand......................
Closing work in
process..................
Total......................

Analysis
Bottling:
Opening inventory in
process..................
Received during
month from Blending
Costs added during
month:
Materials...............
Labor....................
Factory overhead
Finished and transferred to stock......
Closing work in
process..................
Adjusting due to
averaging costs

2,000
15,000

1,500

13,000

14,500

Units
Received
in Dept.

10,000

$ 34,000

500

1,700

4,000
14,500

Units
Transf. or
on Hand

$ 48,220

12,520
$ 48,220

Amount
Charged
to Dept.

Amount
Credited
to Dept.

3,000

$ 16,890

10,000

34,000

0.20
0.80
0.84
5.24

4,970

2,500
8,000
6,100

$3.40

1,025
$ 27,675

26,650

0.20
0.65
0.50

Cost
per Unit
Transf.

$ 27,675

1,500
6,500
7,000
11,000

$ 57,310

2,000

8,580

from prior
department...........
Total......................

(.03)
5.21

13,000

13,000

Summary:
Materials:
Mixing................................................................................
Blending.............................................................................
Bottling...............................................................................
Labor:
Mixing................................................................................
Blending.............................................................................
Bottling...............................................................................
Factory overhead:
Mixing................................................................................
Blending.............................................................................
Bottling...............................................................................
Total production costs for December............................................
Add work in process, beginning of month:
Mixing.......................................................................................
Blending....................................................................................
Bottling......................................................................................
Total..................................................................................................
Deduct work in process, end of month:
Mixing .......................................................................................
Blending....................................................................................
Bottling......................................................................................
Cost of production, goods fully manufactured during
December.........................................................................................

$ 65,890

$ 15,000
2,500
1,500
$

$ 65,890

$ 19,000

4,750
8,000
6,500

19,250

5,240
6,100
7,000

18,340
$ 56,590

2,685
4,970
16,890
1,025
14,220
8,580

24,545
$ 81,135

23,825
$ 57,310

3. Work in ProcessMixing.......................................................
Work in ProcessBlending....................................................
Work in ProcessBottling......................................................
Materials............................................................................

15,000
2,500
1,500

Work in ProcessMixing.......................................................
Work in ProcessBlending....................................................
Work in ProcessBottling......................................................
Payroll................................................................................

4,750
8,000
6,500

Work in ProcessMixing.......................................................
Work in ProcessBlending....................................................
Work in ProcessBottling......................................................

5,240
6,100
7,000

19,000

19,250

Factory Overhead.............................................................

18,340

Work in ProcessBlending....................................................
Work in ProcessMixing................................................

26,650

Work in ProcessBottling..............................................................
Work in ProcessBlending.............................................

34,000

Finished Goods.........................................................................
Work in ProcessBottling...............................................

57,310

26,650

34,000
57,310

4.
Taguchi Manufacturing Co.
Statement of Cost of Goods Manufactured
For the Month Ended December 31, 20-Materials...........................................................................................
Labor.................................................................................................
Factory overhead.............................................................................
Total...................................................................................................

$ 19,000
19,250
18,340
$ 56,590

Add work in process inventories, December 1......................

Total....................................................................................
Less work in process inventories, December 31....................

24,545
$ 81,135
23,825

Cost of goods manufactured during the month............................

$ 57,310

5) Average and FIFO cost methods; losses at the beginning and end of processing Similar to SelfStudy problem 1
Mt. Orab Manufacturing Company uses a process cost system. Its manufacturing operation is
carried on in two departments: Machining and finishing. The Machining Department uses the
average cost method and the finishing department uses the FIFO cost method. Materials are
added in both departments at the beginning of operations, but the added materials do not increase
the number of units being processed. Units are lost in the Machining Department throughout the
production process, and inspection occurs at the end of the process. The lost units have no scrap
value and are considered to be a normal loss. Production statistics for July Show the following
data:
& nbsp; Machining Finishing
Units In process,July 1 (all Material,
40% of labor and overhead).................................. 20,000
Units in Process, July 1 (all material,
80% of labor and overhead)................................... 40,000
Units started in production ................................... 140,000
Units Completed and transferred ............................. 100,000
Units transferred from machining........................... 100,000

Units completed and transferred to

Finished goods ....................................................... & nbsp; 100,000
Units in process, July 31(all material,
60% of labor and overhead) .................................. 40,000
Units in process, July 31 (all material,
40% of labor and overhead).................................... ; 40,000
Units lost in production ............................................... 20,000
Production Cost Machining Finishing
Work in process, July 1:
Materials ................................................................ &nb sp; $40,000 $110,000
Labor ....................................... ................................ 24,000 60,000
Factory Overhead.................................................. 8,000 40,000
Costs in Machining Department......................... &n bsp; 240,000
Costs incurred during month:
Materials ................................................................ $280,000 240,000
Labor ....................................................................... &n bsp; 180,000 160,000
Factory Overhead.................................................. 60,000 80,000
Required:
Prepare a cost of production summary for each department. (Round to three decimal places.)
Mt. Orab Manufacturing Company
Cost of Production SummaryFinishing Department
For the Month Ended July 31, 20-Cost of work in process, beginning of month:
Cost in Machining Department..............................................
Cost in Finishing Department:
Materials........................................................$ 110,000
Labor................................................................
60,000
Factory overhead............................................
40,000
Cost of goods received from Machining during month................
Cost of production for month:
Materials............................................................................
Labor..................................................................................
Factory overhead..............................................................
Total costs to be accounted for................................................
Unit output for month:
Materials:
To complete beginning units in process...........................
Units started and fully manufactured

$240,000

210,000 $

450,000
447,900

$ 240,000
160,000
80,000

480,000
$ 1,377,900*

during month (100,000 - 40,000)................................

Ending units in process (40,000, all material)................

60,000
40,000

Total equivalent production.......................................

100,000

Labor and factory overhead:

To complete beginning units in process
(40,000, 20% to complete)..........................................
Units started and fully manufactured during month....
Ending units in process (40,000, 40% completed).........

8,000
60,000
16,000

Total equivalent production.......................................

84,000

Unit cost for month:

Materials ($240,000 100,000)...............................................
Labor ($160,000 84,000).......................................................
Factory overhead ($80,000 84,000).....................................
Total....................................................................................

Inventory costs:
Cost of goods finished and transferred to finished goods during month:
Beginning units in process:
Prior month's cost.......................................................
$ 450,000
Current cost to complete:
Labor (40,000 20% $1.905)............................
15,240
Overhead (40,000 20% $0.952).....................
7,616
472,856
Units started and finished during month:
Cost in prior dept. (60,000 $4.479).........................
Cost in Finishing Dept. (60,000 $5.257).................

2.400
1.905
0.952

5.257

$ 268,740
315,420

Total cost transferred (60,000 $9.736)..............

Cost of work in process, end of month:
Cost in prior dept. (40,000 units $4.479)......................
Materials (40,000 units $2.400).....................................
Labor (40,000 units 40% $1.905)..............................
Factory overhead (40,000 units 40% $0.952)...........
Total production costs accounted for

584,160
$ 179,160
96,000
30,480
15,232

320,872

$1,377,888*

*Rounding Difference
6) MINI-CASE
Allocation of Joint costs
Lark Manufacturing Company buys crypton for $0.80 a gallon. At the end of processing in
Department 1, Crypton splits off into products A.B and C. Product A is sold at the split-off point

with no further processing. Products B and C require Further processing before they can be sold.
Product B is processed in Department 2, and Product C is processed in Department 3. Following
is a summary of costs and other related data for the year ended December 31:
&n bsp; & nbsp; Dept. 1 Dept. 2 Dept. 3
Cost of crypton ........................................... $ 76,000
Direct Labor................................................. 14,000 $51,000 $ 65,000
Factory Overhead....................................... 10,000 &nbs p; 26,500 49,000
Total.............................................................. $100,000 $77,500 $114,000
& nbsp; Product A Product B Product C
Gallons sold ...................................... 2 0,000 30,000 45,000
Gallons on hand at December 31 ....... 10,000 15,000
Sales in Dollars ................................... $30,000 $96,000 $141,750
No inventories were on hand at the beginning of the year, and no crypton was on hand at the end
of the year. All gallons on hand at the end of the year were complete as to processing. Clark uses
the relative sales value method of allocating joint costs.
Required:
1. Calculate the allocation of joint costs.
2. Calculate the total cost per unit for each product.
3. In examinaning, the product cost reports, Lois Lane, Vice-President-Marketing, notes that the
per unit cost of Product B is greater than the selling price of $3.20 that can be received in the
competitive marketplace. Lane wonders if they should stop selling Product B. How did Lane
determine that the product was being sold at a loss? What per unit cost should be used in
determining if product B should Be sold?

1.

Produc
t
A
B
C
Total

Units
Produced(a
)

Unit

Ultimate

Selling
Price(b)

Sales
Value

Less
Cost
After
Split-Off

$ 45,000
96,000
189,000
$
330,000

0
$ 77,500
114,000
$
191,500

30,000
30,000
60,000

$1.50*
3.20**
3.15***

Sales

Percent

Value at
Split-Off

of Sales
Value

Allocatio
n
Of Joint
Costs

$ 45,000
18,500
75,000
$138,500

32.5%
13.4
54.1
100.0%

$ 32,500
13,400
54,100
$ 100,000

* $30,000/20,000 gals.
** $96,000/30,000 gals.
***$141,750/45,000 gals.

Beginning inventory...................................

A
0

B
0

C
0

2.

Sold during year.........................................

On-hand, end-of-year.................................

20,000
10,000

30,000
0

45,000
15,000

Produced during year................................

30,000

30,000

60,000

Unit cost of Product A = $32,500 / 30,000 gals. = $1.08 gal.

Unit Cost of Product B =$51,000 Direct labor + $26,500 Factory overhead + $13,400
Joint costs = $90,900 / 30,000 gals. = $3.03 / gal.
Unit cost of Product C = $65,000 Direct labor + 49,000 Factory overhead + 54,100
Joint costs = $168,100 / 60,000 gals. = $2.80 / gal.

3.

The joint cost of $13,400 that is allocated to Product B should be ignored in deciding
whether or not it should be sold. The joint cost is a past cost that had to be incurred
just to get all three products to split-off. It will still be $100,000, even if Product B is
not marketed. The comparison should be made between the selling price per unit of
$3.20 and the separable costs incurred after split-off of $2.58 ($77,500/30,000 gals.).
Therefore, Product B provides incremental income of $.62 per unit and it should be
processed beyond split-off and then sold.