Chapter 6 Job Order and Process Costing

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CHAPTER 6
JOB ORDER AND PROCESS COSTING
QUESTIONS FOR WRITING AND DISCUSSION
1. Job-order costing accumulates costs by
jobs, and process costing accumulates costs
by processes. Job-order costing is suitable
for operations that produce custom-made
products that receive different doses of
manufacturing costs. Process costing, on
the other hand, is suitable for operations that
produce homogeneous products that receive
equal doses of manufacturing costs in each
process.
2. More paperwork is required. Labor and ma-
terials are assigned to departments in a
process-costing system. In a job-order cost-
ing system, labor and materials must be
tracked to each job, requiring time tickets
and more use of materials requisitions. Addi-
tionally, a job-order costing system requires
a separate job-order cost sheet for each job.
3. Job-order costing is appropriate for many
service firms. The key factor is that differing
amounts of resources must be used for dif-
ferent jobs. Examples of service firms that
use job-order costing are law firms, account-
ing firms, dentists, automobile repair, and
architectural firms.
4. Unless all your jobs (lawns) are the same
size and require the same services, you will
need to use a job-order costing system. At
minimum, you will need job-order cost
sheets for each customer. You will need la-
bor time tickets to record the amount of time
spent on each job, both to cost the job and
to pay the individual doing the work. A mate-
rials requisition form may be needed if ferti-
lizer or weed control products are used (al-
ternatively, it may be possible to just list the
amount of product used directly on the job-
order cost sheet). The more complicated
your business becomes (e.g., mowing,
trimming, fertilizing, trimming shrubbery, and
planting shrubs and trees), the more source
documents will be needed to keep track of
time, materials, and use of capital equip-
ment (e.g., trimmers and brushhogs).
5. The cost of a job is often strongly related to
the price charged. Logically enough, the
higher the cost of the job, the higher the
price charged to the customer. This relation-
ship makes sense not only to the business
but also to the customer. By comparing the
cost of the individual job with the price
charged, the firm can determine the profit at-
tributable to each job. Then, the firm can de-
cide whether the profit is sufficient to contin-
ue offering the product or service under the
current terms.
6. Materials requisition forms serve as the
source documents for posting materials
usage and costs to individual jobs. Time or
work tickets serve a similar function for la-
bor. Predetermined overhead rates are used
to allocate overhead to jobs.
7. In sequential processing, products pass
through a series of processes, one after
another (i.e., in a given sequence). In paral-
lel processing, products pass through two or
more different sequences at the same time,
merging eventually at the final process.
8. Equivalent units are the number of whole
units that could have been produced, given
the amount of materials, labor, and over-
head used. Equivalent units are the meas-
ure of a period’s output, a necessary input
for the computation of unit costs in a
process-costing system.
9. In calculating this period’s unit cost, the
weighted average method treats prior-period
output and costs carried over to the current
period as belonging to the current period.
The FIFO method excludes any costs and
output carried over from this period’s unit
cost computation.
10. If the per-unit cost of the prior period is the
same as the per-unit cost of the current pe-
riod, there will be no difference between the
results of the weighted average and FIFO
methods. Additionally, if no beginning work-
in-process inventory exists, both the FIFO
and weighted average methods give the
same results.
11. Separate equivalent units must be calcu-
lated for materials and conversion costs.
12. Transferred-in units represent partially com-
pleted units and are clearly a material for the

114466
receiving department. To complete the
product (or further process it), additional ma-
terials and conversion costs are added by
the receiving department.
13. The work-in-process account of the receiv-
ing department is debited, and the work-in-
process account of the transferring depart-
ment is credited. The finished goods ac-
count is debited, and the work-in-process
account of the final department is credited
upon completion of the product.
14. The first step is the preparation of a physical
flow schedule. This schedule identifies the
physical units that must be accounted for
and provides an accounting. The second
step is the equivalent unit schedule. This
schedule computes the equivalent whole
output for the period. The schedule’s com-
putations rely on information from the physi-
cal flow schedule. The next step is computa-
tion of the unit cost. To compute the unit
cost, the manufacturing costs of the period
for the process are divided by the period’s
output. The output is obtained from the
equivalent unit schedule. The fourth step
uses the unit cost to value goods transferred
out and those remaining in work in process.
The final step checks to see if the costs as-
signed in step 4 equal the total costs to ac-
count for.
15. The weighted average method uses the
same unit cost for all goods transferred out.
The FIFO method divides goods transferred
out into two categories: units started and
completed and units from beginning work in
process. The period’s unit cost is used to
value goods started and completed. The
cost of goods transferred out from beginning
work in process is obtained by (1) assigning
them all costs carried over from the prior pe-
riod and (2) using the current period’s unit
cost to value the equivalent units completed
this period.
16. Service firms generally do not have work-in-
process inventories, and so equivalent units
of production are not needed. An important
factor in process costing for services is de-
termining just what constitutes a unit of out-
put.

114477
EXERCISES
6–1
Job-Order Process
a. Paint manufacturing X
b. Auto manufacturing X
c. Toy manufacturing X
d. Custom cabinet making X
e. Airplane manufacturing X
f. Personal computer assembly X
g. Furniture making X
h. Custom furniture making X
i. Dental services X
j. Hospital services X
k. Paper manufacturing X
l. Auto repair X
m. Architectural services X
n. Landscape design services X
o. Light bulb manufacturing X
6–2
1. Auto manufacturing: A job-order example might be Rolls Royce, in which the
cars are made to order. A process-costing example might be Ford Motor
Company.
2. Dental services: A job-order example might be a local, full-service dentist. A
process-costing example might be a denturist (someone who makes only
dentures).
3. Auto repair: A job-order example might be a local mechanic or the service
department of an automobile dealership. A process-costing example might be
a shop that is dedicated to oil changes.
4. Costume making: A job-order example might be a local seamstress who will
make the costumes for children in a junior high school play. A process-
costing example might be a firm dedicated to the manufacture of dance cos-
tumes that are sold nationwide. The designs are preset.

114488
6–3
1. Job #614 Job #615 Job #616 Job #617
Beginning balance $10,200 $ 9,670 $ 0 $ 0
Direct materials 4,200 9,500 1,000 3,150
Direct labor 1,800 4,000 150 800
Applied overhead 1,080 2,400 90 480
Total cost $17,280 $25,570 $1,240 $4,430
2. Ending balance in Work in Process = Job #614 + Job #616 + Job #617
= $17,280 + $1,240 + $4,430 = $22,950
3. Cost of Goods Sold = Job #615 = $25,570
Price of Job #615 = $25,570 + (0.4)($25,570) = $35,798
6–4
1. Overhead applied in October:
Job #265: 0.75 × $15,000 = $11,250
Job #266: 0.75 × $12,000 = $9,000
Job #267: 0.75 × $1,900 = $1,425
Job #268: 0.75 × $7,000 = $5,250
2. Job #265 Job #266 Job #267 Job #268
Beginning balance $30,330 $62,170 $ 0 $ 0
Direct materials 13,000 7,000 3,500 4,750
Direct labor 15,000 12,000 1,900 7,000
Applied overhead 11,250 9,000 1,425 5,250
Total cost $69,580 $90,170 $6,825 $17,000
3. Ending balance in Work in Process = Job #266 + Job #267 + Job #268
= $90,170 + $6,825 + $17,000 = $113,995
Price of Job #265 = $69,580 + (0.30)($69,580) = $90,454

114499
6–5
1. Direct materials $ 3,400
Direct labor (50 hours × $10) 500
Overhead (50 hours × $4) 200
Total cost $ 4,100
Units ÷ 10
Unit cost $ 410
2. Price per home = 1.5 × $410 = $615
3. Jordan would need to prepare a simple form that included columns for the
date, the beginning time, the ending time, the total number of hours worked,
and the job name (or number). She could have a separate page for each day.
This would be especially helpful if she hired other employees from time to
time to work on jobs.
6–6
1. Ending balance in
Work in Process = Job #902 + Job #906 + Job #908 + Job #909
= $400 + $750 + $700 + $905 = $2,755
2. Ending balance in Finished Goods = Job #901 + Job #903 + Job #905 + Job #910
= $650 + $550 + $860 + $803 = $2,863
3. Cost of Goods Sold = Job #904 + Job #907 = $695 + $180 = $875

115500
6–7
1. Job #70 Job #71 Job #72
Balance, 7/1 $25,000 $ 0 $ 0
Direct materials 12,900 9,900 35,350
Direct labor 20,000 6,500 13,000
Applied overhead:
Power1
500 400 2,400
Material handling2
1,250 250 5,000
Purchasing3
400 1,600 400
Total cost $60,050 $18,650 $56,150
1
Job#70:$2 per mh × 250
Job#71:$2 per mh × 200
Job#72:$2 per mh × 1,200
2 Job#70:$25 per move × 50 moves
Job#71:$25 per move × 10 moves
Job#72:$25 per move × 200 moves
3 Job#70: $40 per PO × 10 PO’s
Job#71:$40 per PO × 40 PO’s
Job#72: $40 per PO × 10 PO’s
2. Ending balance in Work in Process = Job #72 = $56,150
3. Ending balance in Finished Goods = Job #71 = $18,650
6–8
Bosserman Company
Income Statement
For the Month Ended July 31, 20XX
Sales ($60,050 × 1.40)................................................. $84,070
Cost of goods sold ..................................................... 60,050
Gross margin .............................................................. $24,020
Selling expenses (0.10 × $84,070 + $4,100) .............. 12,507
Administrative expenses ........................................... 3,900
Operating income ....................................................... $ 7,613

115511
6–9
1. Applied overhead = Direct labor cost × Overhead rate
$140,000= $80,000 × Overhead rate
Overhead rate= 1.75 or 175% of direct labor cost
2. $140,000 Applied overhead
138,500 Actual overhead
$ 1,500 Overapplied overhead
Direct labor 80,000
Overhead applied 140,000
$ 260,000
Add: Beginning work in process 17,000
Less: Ending work in process (32,000)
Cost of goods manufactured $ 245,000
4. Overhead Control...................................... 1,500
Cost of Goods Sold ............................. 1,500
Adjusted cost of goods sold:
$ 210,000
(1,500)
$ 208,500
5. Direct materials ($32,000 – $10,000 – $17,500) $ 4,500
Direct labor (1,000 × $10) 10,000
Overhead applied (175% × $10,000) 17,500
Ending work in process $32,000

115522
6–10
1. Overhead rate = $180,000/20,000 = $9 per DLH
Direct labor 4,000
Applied overhead 3,600*
Total cost $11,740
*$3,600 = $9 × ($4,000/$10)
3. Overhead Control...................................... 189,300
Lease Payable ........................................... 5,000
Accumulated Depreciation....................... 20,000
Wages Payable.......................................... 101,300
Utilities Payable ........................................ 18,000
Other Payables.......................................... 45,000
Work in Process ($9 × 21,000).................. 189,000
Overhead Control...................................... 189,000
4. Actual overhead $189,300
Applied overhead 189,000
Underapplied overhead $ 300
5. Normal cost of goods sold $740,000
Add: Underapplied overhead 300
Adjusted cost of goods sold $740,300
6–11
1. Cutting Sewing Packaging
Department Department Department
Direct materials $5,400 $ 900 $ 225
Direct labor 150 1,800 900
Applied overhead 750 3,600 900
Transferred-in cost:
From cutting 6,300
From sewing 12,600
Total manufacturing cost $6,300 $12,600 $14,625
2. a. Transferred from Cutting to Sewing $6,300
b. Transferred from Sewing to Packaging $12,600
c. Transferred from Packaging to Finished Goods $14,625

115533
3. Unit cost = $14,625/600 = $24.38* per pair
*Rounded
6–12
1. Equivalent unit, Ending work in process = 300 × 0.20 = 60
2. Equivalent units in Total = 60 + 600 = 660
6–13
1. Physical flow schedule:
Units in beginning work in process 14,000
Units started during the period 40,000
Total units to account for 54,000
Units transferred out 45,500
Units in ending work in process 8,500
Total units accounted for 54,000
2. Equivalent units of production:
Materials Conversion
Units completed 45,500 45,500
Add: Units in ending work in process:
(8,500 × 100%) 8,500
(8,500 × 25%) 2,125
Equivalent units of output 54,000 47,625

115544
6–14
1. Cost of ending work in process:
Materials ($1.30 × 0) $ 0
Conversion ($0.50 × 4,800) 2,400
Total cost $2,400
Cost of goods transferred out: $1.80 × 45,000 = $81,000
Units to account for: Units accounted for:
Units in beginning WIP ? Units completed 45,000
Units started ? Units in ending WIP 8,000
Total units 53,000 Total units 53,000
The schedule of equivalent units using the weighted average method does
not give sufficient information to reconstruct the complete physical flow
schedule. Units in beginning work in process are embedded in units com-
pleted.

115555
6–15
1. Department 1:
a. Units transferred to Department 2 = Total units* – Ending WIP
= 6,480 – 3,600
= 2,880
*Total units = Beginning WIP + Units started = 0 + 6,480 = 6,480
b. Materials Conversion
3,600 × 100% 3,600
3,600 × 50% 1,800
2. Department 2:
a. Units transferred out = Total units* – Ending WIP = 4,080 – 600 = 3,480
*Total units = Beginning WIP + Units transferred in = 1,200 + 2,880 = 4,080
b. Materials Conversion
600 × 0% 0
600 × 40% 240

115566
6–16
Units to account for:
Units accounted for:
Units completed and transferred out:
Started and completed 180,000
From beginning work in process 60,000 240,000
2. Units completed 240,000
Add: Units in ending WIP × Fraction complete
(40,000 × 20%) 8,000
Equivalent units of output 248,000
3. Unit cost = ($1,171,800 + $390,600)/248,000 = $6.30
4. Cost transferred out = 240,000 × $6.30 = $1,512,000
Cost of ending WIP = 8,000 × $6.30 = $50,400
5. Costs to account for:
Beginning work in process $ 390,600
Incurred during June 1,171,800
Total costs to account for $ 1,562,400
Costs accounted for:
Goods transferred out $1,512,000
Goods in ending work in process 50,400
Total costs accounted for $1,562,400

115577
6–17 Cocolots Company
Mixing Department
Production Report
For the Month of June 20XX
(Weighted Average Method)
Unit Information
Physical flow:
Units in beginning WIP 60,000 Units completed 240,000
Units started 220,000 Units in ending WIP 40,000
Total units to account for 280,000 Total units accounted for 280,000
Equivalent units:
Units completed 240,000
Total equivalent units 248,000
Cost Information
Costs to account for:
Beginning work in process $390,600
Incurred during March 1,171,800
Total costs to account for $1,562,400
Cost per equivalent unit $ 6.30
Transferred Ending
Out Work in Process Total
Goods transferred out
($6.30 × 240,000) $1,512,000 — $1,512,000
Goods in ending WIP
($6.30 × 8,000) — $50,400 50,400
Total costs accounted for $1,512,000 $50,400 $1,562,400

115588
6–18
A B C D
Completed 16,200a
24,000c
31,000d
60,000f
Ending WIP 1,000b
0 900e
2,500g
Equivalent units 17,200 24,000 31,900 62,500
a
(3,200 + 17,000 – 4,000) e
(9,000 × 0.10)
b
(4,000 × 0.25) f
(30,000 + 40,000 – 10,000)
c
(1,000 + 23,000 – 0) g
(10,000 × 0.25)
d
(40,000 – 9,000)
6–19
A B C D
Completed* 16,200 24,000 31,000 60,000
Add: Ending WIP* 1,000 0 900 2,500
Less: Beginning WIP** 960 400 0 22,500
Equivalent units 16,240 23,600 31,900 40,000
*See solution to Exercise 6–18.
**Beginning WIP for A: 3,200 × 0.30 = 960
Beginning WIP for B: 1,000 × 0.40 = 400
Beginning WIP for C: 0 × 0 = 0
Beginning WIP for D: 30,000 × 0.75 = 22,500
6–20
Units in ending work in process (60% complete) 20,000

115599
6–20 Concluded
2. Materials Conversion
Add: Units in ending WIP ×
Fraction complete (20,000 × 100%; 20,000 × 60%) 20,000 12,000
3. Unit materials cost ($49,000 + $351,000)/80,000 = $5.00
Unit conversion cost ($2,625 + $78,735)/72,000 = 1.13
Total unit cost $6.13
4. Cost transferred out: 60,000 × $6.13 = $367,800
Cost of ending WIP:
Materials: 20,000 × $5.00 = $100,000
Conversion: 12,000 × $1.13 = 13,560
Total ending WIP cost $113,560
Beginning WIP $ 51,625
Incurred during August 429,735
Total costs to account for $481,360
Goods transferred out $367,800
Goods in ending WIP 113,560
Total costs accounted for $481,360

116600
6–21
Bath Linens Department
Production Report
For the Month of August 20XX
Unit Information
Physical flow:
Total units to account for 80,000 Total units accounted for 80,000
Equivalent units:
Units in ending work in process 20,000 12,000
Total equivalent units 80,000 72,000
Cost Information
Materials Conversion Total
Beginning WIP $ 49,000 $ 2,625 $ 51,625
Incurred during August 351,000 78,735 429,735
Total costs to account for $400,000 $81,360 $481,360
Cost per equivalent unit $ 5.00 $ 1.13 $ 6.13
Transferred Ending
($6.13 × 60,000) $367,800 — $367,800
Goods in ending WIP:
Materials ($5 × 20,000) — $100,000 100,000
Conversion costs
($1.13 × 12,000) — 13,560 13,560
Total costs accounted for $367,800 $113,560 $481,360

116611
6–22
1. b
2. d
3. b
4. b
5. a
6. c
7. c
8. e
Supporting computations:
Units in ending WIP
(24,000 × 90%) 21,600
(24,000 × 40%) 9,600
Equivalent units (WA) 113,600 101,600
Less EU in BWIP
(16,000 × 60%) (9,600)
(16,000 × 20%) (3,200)
Equivalent units (FIFO) 104,000 98,400
Unit cost:
FIFO: $468,000/104,000 $573,040/98,400
$4.50 $5.82
WA: ($468,000 + $54,560)/113,600 ($573,040 + $35,560)/101,600
$4.60 $5.99
EWIP:
FIFO: ($4.50 × 21,600) + ($5.82 × 9,600) = $153,072
WA: ($4.60 × 21,600) + ($5.99 × 9,600) = $156,864

116622
6–23
Units in beginning work in process (75% complete) 120,000
Units started during August 370,000
Units in ending work in process (25% complete) 90,000
2. Units started and completed 280,000
Add: Units to complete beginning WIP (120,000 × 25%) 30,000
Add: Units ending WIP × Fraction completed (90,000 × 30%) 27,000
Equivalent units of output 337,000
3. FIFO unit cost = $1,516,500/337,000 = $4.50
4. Costs transferred out:
Costs from beginning WIP $ 340,600
Costs to complete beginning WIP (30,000 × $4.50) 135,000
Started and completed (280,000 × $4.50) 1,260,000
Total costs transferred out $ 1,735,600
Cost of ending WIP = 27,000 × $4.50 = $121,500
5. Costs to account for: Costs accounted for:
Beginning WIP $ 340,600 Transferred out $1,735,600
Added in August 1,516,500 Ending WIP 121,500
Total $ 1,857,100 Total $1,857,100

116633
6–24
Nogaleen Company
Blending Department
Production Report
For the Month of August 20XX
(FIFO Method)
Unit Information
Physical flow:
Units started during August 370,000
Units accounted for: Physical Flow Equivalent Units
Units started and completed 280,000 280,000
Units completed from beginning
work in process 120,000 30,000
Units in ending work in process 90,000 27,000
Total units accounted for 490,000 337,000
Cost Information
Beginning work in process $ 340,600
Incurred during August 1,516,500
Total costs to account for $1,857,100
Cost per equivalent unit $ 4.50
Transferred Ending
Units in beginning work
in process:
From prior period $ 340,600 — $ 340,600
From current period
(30,000 × $4.50) 135,000 — 135,000
Units started and completed
(280,000 × $4.50) 1,260,000 — 1,260,000
Goods in ending work
in process (27,000 × $4.50) — $121,500 121,500
Total costs accounted for $1,735,600 $121,500 $1,857,100

116644
6–25
1. Job #64:
Direct materials $ 1,240
Direct labor 6,150
Overhead ($12 × 410) 4,920
$12,310
Unit cost = $12,310/50 = $246.20
2. Ending Work in Process = Cost of Job #65
= $985 + $8,745 + ($12 × 583) = $16,726
3. Finished Goods ......................................... 12,310
Work in Process .................................. 12,310
Cost of Goods Sold................................... 12,310
Finished Goods ................................... 12,310
Accounts Receivable................................ 19,696*
Sales Revenue ..................................... 19,696
*(160% × $12,310 = $19,696)

116655
PROBLEMS
6–26
1. Overhead rate = $270/$900 = 0.30 or 30% of direct labor dollars.
(This rate was calculated using information from the Fazel job; however, the
Myron and Patton jobs would give the same answer.)
2. Fazel Myron Patton Raider Willis
Beginning WIP $ 1,730 $1,180 $2,500 $ 0 $ 0
Direct materials 600 350 260 780 725
Direct labor 1,200 980 650 1,350 900
Applied overhead 360 294 195 405 270
Total $ 3,890 $2,804 $3,605 $ 2,535 $ 1,895
Note: This is just one way of setting up the job-order cost sheets. You might
prefer to keep the detail on the materials, labor, and overhead in beginning
inventory costs.
3. Since the Fazel and Myron jobs were completed, the others must still be in
process. Therefore, the ending balance in Work in Process is the sum of the
costs of the Patton, Raider, and Willis jobs.
Patton $3,605
Raider 2,535
Willis 1,895
Ending Work in Process $8,035
Cost of Goods Sold = Fazel job + Myron job = $3,890 + $2,804 = $6,694
4. Aldrin Company
Income Statement
For the Month Ended June 30, 20XX
Sales (1.4 × $6,694) ................................................................... $9,372
Cost of goods sold.................................................................... 6,694
Gross margin............................................................................. $2,678
Marketing and administrative expenses................................. 1,200
Operating income...................................................................... $1,478

116666
6–27
1. Overhead rate = $90,000/10,000 = $9 per MHr
Overhead costs = $30,000 + 15,000 + 20,000 + 25,000 = $90,000
Job #1 Job #2
Direct materials $4,500 $ 8,600
Direct labor 1,000 2,000
Overhead ($9 × 200 MHrs.) 1,800 1,800
Total manufacturing cost $7,300 $12,400
Plus 30% markup 2,190 3,720
Bid price $9,490 $16,120
2. Purchasing rate = $30,000/5,000 = $6 per purchase order
Setup cost rate = $15,000/1,000 = $15 per setup
Engineering rate = $20,000/500 = $40 per engineering hour
Other cost rate = $25,000/10,000 = $2.50 per MHr
Job #1 Job #2
Direct materials $4,500 $ 8,600
Direct labor 1,000 2,000
Overhead:
Purchasing ($6 × 15); ($6 × 20) 90 120
Setups ($15 × 2); ($15 × 3) 30 45
Engineering ($40 × 25); ($40 × 10) 1,000 400
Other ($2.50 × 200); ($2.50 × 200) 500 500
Total manufacturing cost $7,120 $11,665
Plus 30% markup 2,136 3,500
Bid price $9,256 $15,165
3. The activity-based approach to assigning overhead gives a more accurate
cost figure because so much of the overhead is non unit-level and there is
product diversity.

116677
6–28
1. a. Materials ............................................... 44,200
Accounts Payable......................... 44,200
b. Work in Process .................................. 27,000
Materials ........................................ 27,000
c. Work in Process .................................. 28,200
Wages Payable.............................. 28,200
d. Overhead Control ................................ 19,950
Cash ............................................... 19,950
e. Work in Process .................................. 18,800
Overhead Control.......................... 18,800
2. Job #703
Beginning balance, Work in Process $13,000
Direct materials 12,500
Direct labor 11,700
Total $45,000
Job #704
Direct materials $14,500
Direct labor 16,500
Total $42,000
3. f. Finished Goods ................................... 45,000
Work in Process............................ 45,000
h. Cost of Goods Sold ............................. 6,240
Finished Goods............................. 6,240
Accounts Receivable .......................... 8,736
Sales Revenue............................... 8,736
4. a. Materials:
Beginning balance $ 6,070
Add: Purchases 44,200
Less: Materials requisitioned (27,000)
Ending balance $ 23,270

116688
6–28 Concluded
b. Work in Process:
Add: Materials requisitioned 27,000
Direct labor 28,200
Less: Jobs completed (45,000)
c. Finished Goods:
Add: Jobs completed 45,000
Less: Jobs sold (6,240)
6–29
1. a. Materials ............................................... 3,000
Accounts Payable......................... 3,000
b. Work in Process .................................. 1,700
Materials ........................................ 1,700
c. Work in Process [$8 × (50 + 100)]....... 1,200
Wages Payable.............................. 1,200
d. Work in Process ($7.50 × 150) ............ 1,125
Overhead Control.......................... 1,125
e. Overhead Control ................................ 1,230
Cash ............................................... 1,230
2. Job #443 Job #444
Direct materials $ 500 Direct materials $1,200
Direct labor 400 Direct labor 800
Applied overhead 375 Applied overhead 750
Total $1,275 Total $2,750
f. Finished Goods ................................... 1,275
Work in Process............................ 1,275
g. Cost of Goods Sold ............................. 2,000
Finished Goods............................. 2,000
Accounts Receivable .......................... 2,500
Sales Revenue............................... 2,500

116699
6–29 Concluded
3. Kearney Company
Statement of Cost of Goods Manufactured
For the Month Ended April 30, 20XX
Direct materials:
Beginning materials inventory ...................... $1,400
Purchases of materials .................................. 3,000
Total materials available ................................ $4,400
Ending materials............................................. 2,700
Materials used................................................. $1,700
Direct labor ........................................................... 1,200
Overhead............................................................... $1,230
Less: Underapplied overhead............................. 105
Overhead applied................................................. 1,125
Current manufacturing costs.............................. $4,025
Add: Beginning work in process........................ 0
Total manufacturing costs .................................. $4,025
Less: Ending work in process ............................ 2,750
Cost of goods manufactured .............................. $1,275

117700
6–30
Debroux Company
Assembly Department
Production Report
For the Month of February 20XX
Unit Information
Equivalent units:
Units completed 34,600
Units in ending WIP (5,400 × 70%) 3,780
Cost Information
Costs in beginning WIP $142,760
Costs added by department 333,152
Cost per equivalent unit ($475,912/38,380) $ 12.40
Goods transferred out (34,600 × $12.40) $429,040
Ending work in process (3,780 × $12.40) 46,872

117711
6–31
Debroux Company
Assembly Department
Production Report
For the Month of February 20XX
(FIFO Method)
Unit Information
Units in beginning WIP 12,000 From beginning WIP 12,000
Units started 28,000 From ending WIP 5,400
Equivalent units:
To complete beginning WIP (12,000 × 40%) 4,800
Units in ending WIP (5,400 × 70%) 3,780
Cost Information
Costs in beginning WIP $142,760
Costs added by department 333,152
Cost per equivalent unit ($333,152/31,180) $10.6848
Transferred out:
Units started and completed (22,600 × $10.6848) $241,476
Units in beginning work in process:
From prior period 142,760
From current period (4,800 × $10.6848) 51,287
Total cost transferred out $435,523
Goods in ending work in process (3,780 × $10.6848) 40,389

117722
6–32
1. a. Physical flow schedule:
Units in BWIP 20,000 From BWIP 20,000
Units started 510,000 From EWIP 30,000
b. Equivalent unit schedule:
Paraffin Pigment Conversion
Units completed 500,000 500,000 500,000
Units in ending WIP 30,000 30,000 21,000*
Total equivalent units 530,000 530,000 521,000
*(30,000 × 70%)
2. Unit cost computation:
Paraffin Pigment Conversion Total
Costs in BWIP $ 120,000 $ 100,000 $ 40,000 $ 260,000
Costs added 3,060,000 2,550,000 5,170,000 10,780,000
Total costs $3,180,000 $2,650,000 $5,210,000 $11,040,000
Unit cost = Unit paraffin cost + Unit pigment cost + Unit conversion cost
= ($3,180,000/530,000) + ($2,650,000/530,000) +
($5,210,000/521,000)
= $6 + $5 + $10 = $21
3. Ending work in process
= (30,000 × $6) + (30,000 × $5) + (21,000 × $10)
= $180,000 + $150,000 + $210,000
= $540,000
Cost of goods transferred out: 500,000 × $21 = $10,500,000
4. Cost reconciliation:
Costs to account for: Costs accounted for:
Beginning WIP $ 260,000 Transferred out $10,500,000
August costs 10,780,000 Ending WIP 540,000
Total to account for $11,040,000 Total accounted for $11,040,000

117733
6–33
Grace Sauces, Inc.
Mixing Department
Production Report
For the First Quarter 20XX
(FIFO Method)
Unit Information
Units in beginning WIP 144,000 Units transferred out 292,500*
Units to account for 324,000 Units accounted for 324,000
* Started and completed = 148,500 + B-WIP 144,000 = 292,500
Equivalent Units
Transferred In Materials Conversion
Units started and completed 148,500 148,500 148,500
Units in BWIP (to complete) — — 36,000
Units in EWIP 31,500 31,500 6,300
Total units accounted for 180,000 180,000 190,800
Cost Information
Costs to account for: Transferred In Materials Conversion Total
Beginning WIP $ 45,600 $ 6,432 $14,400 $ 66,432
Incurred during quarter 230,400 33,500 72,640 336,540
Total costs to account for $276,000 $39,932 $87,040 $402,972
Equivalent units 180,000 180,000 190,800
Cost incurred during quarter
÷ Equivalent units $ 1.28 $ 0.1861 $0.3807 $ 1.8468
Costs accounted for: Transferred Out EWIP Total
Started/complete (148,500 × $1.8468) $274,250 — $274,250
Units in beginning WIP:
From prior period 66,432 — 66,432
Current period (36,000 × $0.3807) 13,705 — 13,705
Units in ending WIP:
Transferred in (31,500 × $1.28) — $40,320 40,320
Materials (31,500 × $0.1861) — 5,862 5,862
Conversion (6,300 × $0.3807) — 2,398 2,398
Total costs accounted for $354,387 $48,580 $402,967*
*Difference due to rounding.

117744
6–34
Grace Sauces, Inc.
Mixing Department
Production Report
For the First Quarter 20XX
Unit Information
Units in beginning WIP 144,000 Units transferred out 292,500
Units to account for 324,000 Units accounted for 324,000
Equivalent Units
Transferred In Materials Conversion
Units completed 292,500 292,500 292,500
Units in ending WIP 31,500 31,500 6,300
Total units accounted for 324,000 324,000 298,800
Cost Information
Costs to account for: Transferred In Materials Conversion Total
Beginning WIP $ 45,600 $ 6,432 $14,400 $ 66,432
Incurred during quarter 230,400 33,500 72,640 336,540
Total costs to account for $276,000 $ 39,932 $87,040 $402,972
÷ Equivalent units 324,000 324,000 298,800
Cost per equivalent unit $ 0.852 $ 0.12 $ 0.291 $ 1.27
Costs accounted for: Transferred Out EWIP Total
(292,500 × $1.27) $370,421 — $370,421
Ending work in process:
Transferred in (31,500 × $0.852) — $26,838 26,838
Materials (31,500 × $0.12) — 3,780 3,780
Conversion (6,300 × $0.291) — 1,835 1,835
Total costs accounted for $370,421 $32,453 $402,874*

117755
6–35
1. Department A
a. Physical flow schedule:
Units in beginning WIP 5,000
Units started in November 25,000
From beginning WIP 5,000
Units in ending WIP 2,000
Costs charged to the department:
Beginning WIP $10,000 $ 6,900 $ 16,900
Incurred during November 57,800 95,220 153,020
Total costs $67,800 $102,120 $169,920
b. Equivalent unit calculation:
Add: Equivalent units in ending WIP 2,000 1,600
c. Unit cost calculation:
Unit cost = Unit material cost + Unit conversion cost
= $67,800/30,000 + $102,120/29,600
= $2.26 + $3.45
= $5.71

117766
6–35 Continued
d. and e. Cost reconciliation:
Total costs accounted for:
Goods transferred out (28,000 × $5.71) .................. $159,880
Costs in ending WIP:
Materials (2,000 × $2.26) ..................................... $4,520
Conversion (1,600 × $3.45) ................................. 5,520 10,040
Total costs accounted for .................................. $169,920
Beginning work in process ................................ $ 16,900
Costs incurred during November...................... 153,020
Total costs to account for .................................. $169,920
2. Journal entries:
Work in Process—Dept. A ....................... 57,800
Materials Inventory.............................. 57,800
Conversion Costs—Dept. A ............... 95,220*
Work in Process—Dept. B ....................... 159,880
Work in Process—Dept. A.................. 159,880
*When conversion costs are not broken into labor and overhead components,
a control account for conversion costs is used. Some firms now combine
overhead and direct labor costs into one category. This practice is develop-
ing because direct labor is becoming a small percentage of total manufactur-
ing costs.

117777
6–35 Continued
3. Department B
Units started in November (transferred in) 28,000
Transferred
Materials Conversion In Total
Beginning WIP $ 0 $ 16,800 $ 45,320 $ 62,120
Incurred in Nov. 37,950 128,100 159,880 325,930
Total costs $37,950 $144,900 $205,200 $388,050
Transferred
Materials Conversion In
Units completed 33,000 33,000 33,000
Add: Equivalent units in EWIP 0 1,500 3,000
Unit cost = Unit material cost + Unit conversion cost + Unit
transferred in cost
= ($37,950/33,000) + ($144,900/34,500) + ($205,200/36,000)
= $1.15 + $4.20 + $5.70
= $11.05

117788
6–35 Concluded
Total costs accounted for:
Goods transferred out (33,000 × $11.05) ................ $364,650
Materials............................................................... $ 0
Conversion (1,500 × $4.20) ................................. 6,300
Transferred in (3,000 × $5.70)............................. 17,100
Total costs in ending WIP........................................ 23,400
Journal entries for Department B:
Work in Process—Dept. B.................. 159,880
Work in Process—Dept. A........... 159,880
Work in Process—Dept. B .................. 37,950
Materials Inventory ....................... 37,950
Work in Process—Dept. B .................. 128,100
Conversion Costs—Dept. B......... 128,100*
Finished Goods ................................... 364,650
Work in Process—Dept. B ........... 364,650
*Because conversion costs are not broken into labor and overhead com-
ponents, a control account for conversion costs is used. Some firms are
now combining overhead and direct labor costs into one category. This
practice is developing because direct labor is becoming a small percen-
tage of total manufacturing costs.

117799
6–36
1. Department A
Units started in November 25,000
Beginning WIP $10,000 $ 6,900 $ 16,900
Incurred during November 57,800 95,220 153,020
Total costs $67,800 $102,120 $169,920
Units started and completed 23,000 23,000
Equivalent units in beginning WIP — 3,000
Equivalent units in ending WIP 2,000 1,600
Unit cost = Unit material cost + Unit conversion cost
= ($57,800/25,000) + ($95,220/27,600)
= $2.312 + $3.45
= $5.762

118800
6–36 Continued
Cost of units started and completed (23,000 × $5.762) $132,526
Cost of units in beginning WIP:
Prior-period costs ............................................... 16,900
Current cost to finish units (3,000 × $3.45)....... 10,350
Total cost of units transferred out .......................... $159,776
Materials (2,000 × $2.312) ................................... $4,624
Conversion (1,600 × $3.45) ................................. 5,520
Beginning WIP..................................................... $ 16,900
Costs incurred..................................................... 153,020
2. Journal entries:
Materials Inventory.............................. 57,800
Conversion Costs—Dept. A ............... 95,220*
Work in Process—Dept. A.................. 159,776
*Because conversion costs are not broken into labor and overhead com-
ponents, a control account for conversion costs is used. Some firms are
now combining overhead and direct labor costs into one category. This
practice is developing because direct labor is becoming a small percen-
tage of total manufacturing costs.

118811
6–36 Continued
3. Department B
Units started in November (transferred in) 28,000
Transferred
Materials Conversion In Total
Beginning WIP $ 0 $ 16,800 $ 45,320 $ 62,120
Incurred during Nov. 37,950 128,100 159,776 325,826
Total costs $37,950 $144,900 $205,096 $387,946
Transferred
Materials Conversion In
Units started and completed 25,000 25,000 25,000
Equivalent units in BWIP 8,000 4,000 0
Equivalent units in EWIP 0 1,500 3,000
Unit cost = Unit material cost + Unit conversion cost + Unit
transferred in cost
= $37,950/33,000 + $128,100/30,500 + $159,776/28,000
= $1.15 + $4.20 + $5.706
= $11.056

118822
6–36 Concluded
Cost of units started and completed (25,000 × $11.056) $276,400
Cost of units in beginning WIP:
Prior-period costs ............................................... 62,120
Current cost to finish units:
Materials (8,000 × $1.15) ..................................... 9,200
Conversion (4,000 × $4.20) ................................. 16,800
Total costs of goods transferred out...................... $364,520
Conversion (1,500 × $4.20) ................................. $ 6,300
Transferred in (3,000 × $5.706)........................... 17,118
Total costs accounted for .................................. $387,938*
Total costs to account for .................................. $387,946*
Journal entries for Department B:
Work in Process—Dept. A........... 159,776
Materials Inventory ....................... 37,950
Conversion Costs—Dept. B ........ 128,100*
Finished Goods ................................... 364,520
Work in Process—Dept. B........... 364,520
*As before, a control account for conversion cost is used to combine over-
head and direct labor cost into one category.

118833
6–37
1. a. Molding
Beginning WIP 500 Transferred out 1,300
Started 1,000 Ending WIP 200
1,500 1,500
b. Assembly
Beginning WIP 0 Transferred out 900
Started 1,300 Ending WIP 400
1,300 1,300
c. Packaging
Beginning WIP 150 Transferred out 1,050
Started 900 Ending WIP 0
1,050 1,050
2. Equivalent units:
Molding Assembly Packaging
Mat. Conv. Tr. In Mat. Conv. Tr. In Mat. Conv.
Trans. out 1,300 1,300 900 900 900 1,050 1,050 1,050
EWIP 200 40 400 160 160 0 0 0
1,500 1,340 1,300 1,060 1,060 1,050 1,050 1,050
3. Molding Assembly Packaging
Unit prior department cost — $11.50 $13.06
Unit materials cost $ 5.00 0.46 2.65
Unit conversion cost 6.50 1.10 3.05
Total unit cost $11.50 $13.06 $18.76
Molding:
Unit materials cost: ($2,500 + $5,000)/1,500 = $5.00
Unit conversion cost: ($1,050 + $7,660)/1,340 = $6.50

118844
6–37 Concluded
Assembly:
Unit transferred-in cost: (0 + $14,950)/1,300 = $11.50
Unit materials cost: (0 + $487.60)/1,060 = $0.46
Unit conversion cost: (0 + $1,166)/1,060 = $1.10
Packaging:
Unit transferred-in cost: ($1,959 + $11,754)/1,050 = $13.06
Unit materials cost: ($375 + $2,407.50)/1,050 = $2.65
Unit conversion cost: ($225 + $2,977.50)/1,050 = $3.05
4. Molding:
Transferred out: (1,300 × $11.50) = $14,950
Ending WIP: (200 × $5) + (40 × $6.50) = $1,260
Assembly:
Transferred out: (900 × $13.06) = $11,754
Ending WIP: (400 × $11.50) + (160 × $1.56) = $4,849.60
Packaging:
Transferred out: (1,050 × $18.76) = $19,698
Ending WIP: 0
BWIP + Current = Total
Molding $3,550.00 $12,660.00 $16,210.00
Assembly 0.00 16,603.60 16,603.60
Packaging 2,559.00 17,139.00 19,698.00
Trans. Out + EWIP = Total
Molding $14,950.00 $1,260.00 $16,210.00
Assembly 11,754.00 4,849.60 16,603.60
Packaging 19,698.00 0.00 19,698.00

118855
6–38
1. Equivalent units:
Molding Assembly Packaging
Mat. Conv. Tr. In Mat. Conv. Tr. In Mat. Conv.
Started and
completed 800 800 900 900 900 900 900 900
BWIP 0 350 0 0 0 0 0 75
EWIP 200 40 400 160 160 0 0 0
1,000 1,190 1,300 1,060 1,060 900 900 975
2. Molding:
Unit materials cost: $5,000/1,000 = $ 5.000
Unit conversion cost: $7,660/1,190 = 6.437
Assembly:
Unit transferred-in cost: $14,950/1,300 = $11.500
Unit materials cost: $487.60/1,060 = 0.460
Unit conversion cost: $1,166/1,060 = 1.100
Packaging:
Unit transferred-in cost: $11,754/900 = $13.060
Unit materials cost: $2,407.50/900 = 2.675
Unit conversion cost: $2,977.50/975 = 3.054
3. Molding:
Transferred out:
Started and completed (800 × $11.437) $ 9,149.60
Prior-period cost 3,550.00
Complete beginning WIP (350 × $6.437) 2,252.95
Total transferred out $ 14,952.55
Ending WIP: (200 × $5) + (40 × $6.437) $ 1,257.48

118866
6–38 Concluded
Assembly:
Transferred out:
Prior-period cost 0.00
Complete beginning WIP 0.00
Ending WIP: (400 × $11.50) + (160 × $1.56) $ 4,849.60
Packaging:
Transferred out:
Prior period cost 2,559.00
Complete beginning WIP (75 × $3.054) 229.05
Ending WIP: $ 0
4. Cost reconciliation:
BWIP + Current = Total
Molding $3,550.00 $12,660.00 $16,210.00
Assembly 0.00 16,603.60 16,603.60
Packaging 2,559.00 17,139.00 19,698.00
Trans. Out + EWIP = Total
Molding $14,952.55 $1,257.48 $16,210.03*
Assembly 11,754.00 4,849.60 16,603.60
Packaging 19,698.15 0.00 19,698.15*

118877
MANAGERIAL DECISION CASES
6–39
1. Gary’s proposal requires Donna to falsify the equivalent unit calculation so
that income and assets can be inflated and reported incorrectly. Falsification
of the production report would be a violation of at least two major ethical
standards: integrity and objectivity. Falsification does not allow the organiza-
tion to attain its legitimate and ethical objectives. Moreover, if Donna agrees
to the proposal, she would be taking action that would discredit her profes-
sion. Finally, Donna has an ethical obligation to communicate information
fairly and objectively, disclosing all information that would be needed for the
loan officer to fairly assess the merits of the company’s request for a loan.
Clearly, Donna should not agree to falsify the production report.
2. Donna has an obligation to report Gary to a superior only if an actual ethical
problem exists. If Gary decides that the course of action he is suggesting is
not really in his or the company’s best interests, then no ethical problem ex-
ists, and no action by Donna is needed.
3. If Gary insists on his idea of falsification of the division’s reports, Donna
should attempt to resolve the conflict by appealing to Gary’s immediate su-
pervisor (and on up, if necessary, until a satisfactory resolution is achieved).
If no satisfactory resolution is possible, then Donna should resign and sub-
mit an informative memo to a representative of the organization.
4. In this situation, the ethical dilemma is complicated by two factors: Donna’s
age and a low likelihood of resolution by appealing to higher-level authorities.
Donna’s age may make it more difficult to find alternative employment (at
least at the same level and pay), and it may mean possible forfeiture of re-
tirement benefits. Many students will likely respond that Donna should still
resign (assuming that resolution is not likely), recommending the ideal out-
come. While Donna’s ultimate resignation is the right choice if resolution
fails, students should realize that ethical behavior may often carry with it
some very significant personal sacrifices. It could be argued, however, that
the costs of unethical behavior are even greater.
Another possibility is to encourage Donna to see a lawyer. She has the option
of fighting back, and at her age (with retirement benefits at stake), a good of-
fense may be her best defense.

118888
RESEARCH ASSIGNMENT
6–40
Answers will vary.
6–41
Answers will vary.

Chapter 6 Job Order and Process Costing

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