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Illustrative Problem 1 (Continuous Normal and Abnormal Spoilage)

Kristine and Jill Company, manufacturer of “Gatas na Choco” added all materials at the start of the
production process and obtained the following information for July, 2019:

Work in Process, beginning (80% complete) 10,000 units

Started during the month 35,000 units
Normal spoilage (continuous) 6,000 units
Abnormal spoilage 2,500 units
Work in Process, end (55% complete) 15,000 units
Transferred out 21,500 units

Work in process, beginning or Costs last month consist of: Materials P10,000
Conversion Costs 40,000

Current Production Costs or Costs added this month Materials 60,000

Conversion Costs 180,000

Required: Prepare the July Cost of Production Report using Weighted Average and FIFO method.

Illustrative Problem 2 (Discrete Normal and Abnormal Spoilage)

Iyonis Kundi Industries manufactures wood furniture. In the Lamination Department, varnish is added
when the goods are 60 percent complete as to overhead. The units that are spoiled during processing
are found upon inspection at the end of production. Spoilage is considered discrete.

Production Data for May 2019:

Beginning inventory (80% L; 70% OH) 1,000 units
Transferred in during the month 7,450 units
Ending inventory (40% L; 20% OH) 1,500 units
Normal discrete spoilage (found during final quality inspection) 100 units
Abnormal discrete spoilage (30% L; 15% CC; the sanding machine was 200 units
misaligned and scarred the chairs)

All other units were transferred to finished goods.

Cost Data for May 2019:

Beginning work in process inventory:

Prior department costs P7,510
Varnish 950
Direct labor 2,194
Overhead 5,522 P16,176

Current period costs:
Prior department costs 7,015
Varnish 23,000
Direct labor 56,782 155,337
Overhead P171,513

Required: Prepare the May Cost of Production Report using Weighted Average and FIFO method.

Illustrative Problem 3 (Discrete Normal and Abnormal Spoilage)

N U Worx Manufacturing Inc. produces a product in its Processing Department wherein direct materials
are added at the start of the process and conversion costs are applied evenly throughout the process.
Before inspection, some units are spoiled due to undetectable material defects. Inspection occurs when
units are 50% converted. Spoiled units generally constitute 5% of the good units. The following
information is available from the company’s cost records:

WIP, beginning (all Materials: 75% Conversion Costs) 20,000 units

Started during December 40,000 units
Finished and transferred out 45,000 units
WIP, end (all Materials; 65% Conversion Costs) 10,000 units

Costs for December:

WIP, beginning Inventory:
Direct materials P50,000
Conversion costs 30,000
Direct materials added 100,000
Conversion costs added 140,000

Required: Prepare the May Cost of Production Report using Weighted Average and FIFO method.

Illustrative Problem 4 (CPR with Accretion; using Weighted Average method)

Barley Company produces organic barley juice drinks in three departments, Syrup, Mixing, and Bottling.
Syrup, which gives the juice drink its flavor, is produced in the first department. The syrup is then
transferred to the second department, where water with sucralose is added to give the drink its fizz.
After the water has been added, the liquid drink is bottled. A process costing system using weighted
average cost flow assumption is used to account for work in process inventories. Data related to
operations in the Mixing Department during October are:

Units in beginning inventory 1,000
Units received from the Syrup Department this month 2,000
Units added to process in the Mixing Department this month 6,000
Units transferred to Bottling Department this month 7,800
Units in ending inventory (100% materials; 25% conversion costs) 1,200

Beginning Added
Inventory This Month
Costs charged to the Mixing Department:
Costs from Syrup Department P1,120 P9,680
Materials 190 1,610
Direct labor 60 1,560
Factory overhead 120 3,120

Required: Prepare a Cost of Production Report for the Mixing Department.

Illustrative Problem 5 (CPR with Accretion; using FIFO method)

Herbal Products Company produces a chemical preservative in two departments, Refining and Blending.
The process begins in the Refining Department, where the liquid chemical base is removed from a crude
chemical stock purchased from a large domestic chemical company. The liquid base is then transferred
to the Blending Department, where other chemicals are added, which increase the total quantity of the
product. The blended product is then transferred to the warehouse to await sale and shipment to
customers. Materials are added at the beginning of the process in the Blending Department. At the end
of April, there were 2,000 units in process in the Blending Department, 20% complete as to labor and
40% complete as to overhead. During May, 5,000 units were received from the Refining Department,
and a sufficient quantity of materials was added in the Blending Department to double the quantity of
units in process. At the end of May, there were 1,500 units still in process, 60% complete as to labor and
80% complete as to overhead. Cost data related to May operations in the Blending Department are:

Beginning Added
Inventory This Month
Cost charged to the department:
Costs from the preceding department P2,460 P12,500
Materials 500 2,500
Direct labor 150 3,300
Factory overhead 600 7,630
P3,710 P29,640

Required: Prepare a CPR for the Blending Department using FIFP cost flow for May.

Illustrative Problem 6 (Operation Costing)

The June production of MVP Sporting Goods Division consisted of batch P25 (2,000 professional
basketballs) and batch S33 (4,000 scholastic basketballs). The professional balls were made of genuine
leather exteriors and are packed in a cardboard box. The scholastic balls were made of synthetic
laminated rubber and sold without special packaging. Each batch was started and finished in June, and
there was no beginning or ending inventory of work in process. Cutting and Stitching operations are
similar. Costs incurred were as follows:

Direct Material:
Batch P25, P42,000 including P2,000 for packaging materials; Batch S33, P45,000

Conversion Costs:
Cutting Department, predetermined rate of P7.50 per unit;
Stitching Department, predetermined rate of P6.00 per unit;
Packaging Department, predetermined rate of P.50 per unit. (Only the professional balls are

Calculate the unit production cost and total production cost.

Illustrative Problem 7 (Operation Costing)

Robee Footwear Inc. manufactures high heeled shoes for its Ayala and SM Cebu branches. The company
uses an operation-costing system. All shoes are processed through Department #1, with subsequent
processing taking place in either Department #2 or Department #3 depending on the type of leather
material used. Twenty thousand (20,000) high-heeled pairs of shoes were produced in 2019; there was
no beginning or ending work in process. Sixty percent (60%) of the shoes were sent to Department #2
for processing.

Conversion costs incurred in the three (3) departments totaled P660,000, allocated as follows:
Department #1, P400,000; Department #2, P180,000; and Department #3, P80,000. Data pertaining to
two (2) representative orders, nos. 213 and 921, were:

No. 213 No. 921

Direct materials P120,000 P100,000
Pairs of high-heeled shoes 1,000 1,300
Subsequent processing department Dept. #3 Dept. #2

Computation for the conversion costs per pair of shoes is shown below. These conversion costs shall be
used in order to ascertain the costs for representative order Nos. 213 and 921.

Conversion cost per pair of shoes:

Department #1: P400,000 ÷ 20,000 pairs = P20.00
Department #2: P180,000 ÷ (20,000 x 60%) pairs = P15.00
Department #3: P80,000 ÷ (20,000 x 40%) pairs = P10.00