Ch06 Managerial accounting aiou mba mcom 8508

CHAPTER 6
DISCUSSION QUESTIONS
6-1
Q6-1. The basic objective of process costing is to
determine the costs of the products manufac-
tured by the company. Determining the cost of
the products manufactured is necessary in
order to properly cost ending inventories for
external reporting purposes (i.e., reporting to
creditors and owners of the company, the
SEC, and the IRS) and to evaluate the prof-
itability of the manufacturing activity. In order
to cost products, the costs must be deter-
mined for materials, labor, and factory over-
head used to process each unit of product
through each department.
Q6-2. The products manufactured within a depart-
ment (or cost center) during the period can be
heterogeneous if job order costing is used,
but must be homogeneous if process costing
is used. In job order costing, products are
accounted for in batches. The cost of each
unit of product manufactured on a job is deter-
mined by dividing the total cost charged to the
job by the number of units produced on the
job. Since the manufacturing cost of each job
is accounted for separately, accurate and
useful product cost can be determined even
when the products manufactured on different
jobs are substantially different. By contrast, in
process costing, all manufacturing costs are
charged to the department, and the unit cost
is determined by dividing the cost charged to
the department by the number of units pro-
duced. As a consequence, the units of prod-
uct manufactured within a department must
be essentially alike in order for the cost allo-
cated to each unit to be meaningful (i.e., to
reasonably reflect the actual cost of the
resources used to manufacture the product).
Q6-3. (a) Process
(b) Process, unless significantly different
models are manufactured
(c) Process
(d) Job order
(e) Process
(f) Process
(g) Job order
(h) Process, unless different fabrics are used
for different models, in which case the
conversion costs may be accounted for
using process, but the materials using job
order
Q6-4. Three product flow formats are: sequential,
parallel, and selective.
Sequential means that the product flows or is
manufactured in an unchanging fixed set of
operations, going from one department to the
next.
Parallel means that certain operational
phases take place simultaneously in other
departments and the partially completed units
or parts are brought together in subsequent
departments.
Selective refers to the fact that a product does
not necessarily move through every depart-
ment. Depending upon the character or shape
of the final product, different departments are
engaged in completing the desired product.
Q6-5. Materials Costs—In job order costing, materi-
als requisitions are used and charges are
made to jobs; in process costing, charges for
materials issued to production are made to
departments, with infrequent use of materials
requisitions.
Labor Costs—Time tickets are used in job
order costing to accumulate labor costs for
each job; in process costing, labor costs are
charged to departments, and, therefore,
detailed time records are not necessary.
Factory Overhead—Job order costing
requires the use of predetermined rates for
charging overhead to jobs; in process costing,
actual overhead may be used. (However, pre-
determined rates are often used in order to
smooth overhead that is not incurred at the
same rate as production activity.)
Summarizing Costs—A job order cost sheet is
used to accumulate the costs of an order in job
order costing; a cost of production report is
used in process costing. In job order costing,
costs are summarized on completion of the
job; in process costing, costs charged to the
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department and costs accounted for are sum-
marized in the cost of production report each
month (or sometimes each week).
Q6-6. Predetermined overhead rates can and
should be used if the pattern of overhead cost
incurrence does not follow the pattern of pro-
duction activity. Some items of overhead are
fixed and not responsive to changes in produc-
tion activity. If production volume varies each
month, then predetermined overhead rates
should be used. Some items of overhead are
incurred only at certain times during the year,
but benefit production throughout the year
(e.g., payroll taxes, insurance, property taxes,
vacation pay, etc.). These items can be
recorded as prepaid expenses and amortized
uniformly to each month if actual overhead is
charged to production. Alternatively, estimates
of such costs can be included in the predeter-
mined overhead rate, and the actual cost
charged to overhead when incurred. The use
of predetermined rates is often simpler than
the allocation of actual costs because a single
predetermined rate requires only one over-
head charge to each department each month.
In contrast, the capitalization and amortiza-
tion of each item of actual overhead would
require numerous charges each month.
Q6-7. A cost of production report is an effective
monthly (or weekly) summary of the cost of
materials, labor, and overhead consumed by
each department or cost center, along with a
record of the quantity of products manufactured.
It provides information necessary to cost
products, prepare journal entries to record the
transfer of costs between departments, and
control costs.
Q6-8. The sections commonly found in a cost of pro-
duction report are: (a) a quantity schedule
indicating the source and disposition of the
units of product, (b) a cost charged to the
department section, indicating the cost in total
and per unit for the cost transferred in from
the preceding department, as well as materi-
als, labor and overhead charged to the
department, and (c) a cost accounted for sec-
tion indicating the amount of cost assigned to
the units transferred out of the department, as
well as the cost of ending inventory.
Q6-9. Separate departmental cost of production
reports are used to accumulate costs more
accurately and to provide more detailed data
for cost control purposes than a plant-wide
cost of production report could provide. In
some cases (e.g., a manufacturing plant that
has a selective production flow for its prod-
ucts), a plant-wide cost of production report
cannot be used.
Q6-10. An equivalent unit of production is the amount
of a resource (e.g., materials, labor, or over-
head) that would be required to complete one
unit of the product with respect to the cost ele-
ment being considered. The total number of
equivalent units, with respect to a particular
element of cost, represents the number of
units of the product that could have been
completed with the resources used during the
period.
6-2 Chapter 6

EXERCISES
E6-1
(1) Cost from
Preceding Factory
Department Materials Labor Overhead
Equivalent units transferred out................. 20,000 20,000 20,000 20,000
Equivalent units in ending inventory:
Cost from preceding department
(100% × 5,000) ................................ 5,000
Materials (100% × 5,000) .................... 5,000
Labor (80% × 5,000) .............................. 4,000
Factory overhead (60% × 5,000) ......... 3,000
Total equivalent units................................... 25,000 25,000 24,000 23,000
(2) Cost from
Preceding Factory
Department Materials Labor Overhead
Cost in beginning inventory........................ 0 0 0 0
Cost added during current period.............. $40,000 $15,000 $ 9,600 $16,330
Total cost to be accounted for.................... $40,000 $15,000 $ 9,600 $16,330
Divided by total equivalent units ................ 25,000 25,000 24,000 23,000
Cost per equivalent unit .............................. $ 1.60 $ .60 $ .40 $ .71
E6-2
Work in Process—Department X............................................. 50,000
Work in Process—Department Y ............................................. 40,000
Materials ........................................................................ 90,000
Payroll............................................................................ 150,000
Factory Overhead ........................................................ 250,000
Work in Process—Department X ................................ 300,000
Finished Goods Inventory........................................................ 448,000
Work in Process—Department Y................................. 448,000
Chapter 6 6-3

E6-3 Tyndol Fabricators Inc.
Cutting and Forming Department
Cost of Production Report
For November
Quantity Schedule Materials Labor Overhead Quantity
Beginning inventory................................ 800
Started in process this period ............... 3,200
4,000
Transferred to Assembling Department 3,400
Ending Inventory ..................................... 75% 40% 25% 600
4,000
Cost Charged to Department Total Equivalent Unit
Beginning inventory: Cost Units* Cost**
Materials ..................................................................................... $ 17,923
Labor .......................................................................................... 2,352
Factory overhead....................................................................... 3,800
Total cost in beginning inventory.................................... $ 24,075
Cost added during current period:
Materials ..................................................................................... $ 68,625 3,850 $22.48
Labor........................................................................................... 14,756 3,640 4.70
Factory overhead....................................................................... 29,996 3,550 9.52
Total cost added during current period............................ $113,377
Total cost charged to department.................................................. $137,452 $36.70
%
Cost Accounted for as Follows Units Complete Unit Cost Total Cost
Transferred to Assembling Department 3,400 100% $36.70 $124,780
Work in Process, ending inventory:
Materials ............................................ 600 75% $22.48 $10,116
Labor.................................................. 600 40% 4.70 1,128
Factory overhead.............................. 600 25% 9.52 1,428 12,672
Total cost accounted for ........................ $137,452
*Total number of equivalent units required in the cost accounted for section determined as follows:
Materials Labor Overhead
Equivalent units transferred out............ 3,400 3,400 3,400
Equivalent units in ending inventory .... 450 240 150
Total equivalent units.............................. 3,850 3,640 3,550
** Total cost (i.e., the cost in beginning inventory plus the cost added during the current period)
divided by the total number of equivalent units required in the cost accounted for section
6-4 Chapter 6

E6-4 Tokyo Manufacturing Company
Molding Department
For August
Beginning inventory................................ 1,000
10,000
Transferred to Finishing Department.... 9,200
Ending inventory ..................................... 75% 25% 25% 800
10,000
Materials ..................................................................................... $ 4,120
Labor........................................................................................... 522
Factory overhead....................................................................... 961
Materials ..................................................................................... $39,980 9,800 $4.50
Labor........................................................................................... 12,638 9,400 1.40
%
Transferred to Finishing Department.... 9,200 100% $8.00 $73,600
Materials .............................................. 800 75% $4.50 $2,700
Labor.................................................... 800 25% 1.40 280
Factory overhead................................ 800 25% 2.10 420 3,400
Equivalent units transferred out ....... 9,200 9,200 9,200
Equivalent units in ending inventory 600 200 200
Total equivalent units ........................ 9,800 9,400 9,400
Chapter 6 6-5

E6-5 Stanislov Corporation
Forming Department
For September
Received from Cutting Department....... 4,600
6,000
Transferred to Painting Department...... 5,000
Ending inventory ..................................... 60% 30% 30% 1,000
6,000
Cost from preceding department............................................. $ 21,120
Materials .................................................................................... 5,880
Labor........................................................................................... 2,614
Total cost in beginning inventory...................................... $ 34,842
Cost from preceding department............................................. $ 68,280 6,000 $14.90
Materials ..................................................................................... 20,440 5,600 4.70
Labor........................................................................................... 17,526 5,300 3.80
Factory overhead ...................................................................... 35,052 5,300 7.60
Total cost charged to department ................................................. $176,140 $31.00
%
Transferred to Painting Department...... 5,000 100% $31.00 $155,000
Cost from preceding department.... 1,000 100% $14.90 $14,900
Materials ............................................ 1,000 60% 4.70 2,820
Labor.................................................. 1,000 30% 3.80 1,140
Factory overhead.............................. 1,000 30% 7.60 2,280 21,140
Total cost accounted for......................... $176,140
Prior Dept.
Cost Materials Labor Overhead
Equivalent units transferred out............ 5,000 5,000 5,000 5,000
Equivalent units in ending inventory .... 1,000 600 300 300
Total equivalent units.............................. 6,000 5,600 5,300 5,300
6-6 Chapter 6

E6-6 Sonneli Corporation
Assembly Department
For February
2,500
Transferred to Finished Goods.............. 2,000
Ending inventory .................................... 80% 60% 60% 500
2,500
Cost from preceding department............................................. $11,800
Materials ..................................................................................... 4,000
Labor .......................................................................................... 1,200
Total cost in beginning inventory...................................... $19,400
Cost from preceding department............................................. $63,200 2,500 $30.00
Materials ..................................................................................... 21,200 2,400 10.50
Labor .......................................................................................... 17,660 2,300 8.20
Total cost added during current period.......................... $137,380
%
Transferred to Finished Goods.............. 2,000 100% $65.10 $130,200
Cost from preceding department.... 500 100% $30.00 $15,000
Materials ............................................ 500 80% 10.50 4,200
Labor.................................................. 500 60% 8.20 2,460
Prior Dept.
Equivalent units in ending inventory .... 500 400 300 300
Chapter 6 6-7

E6-7 Saleri Manufacturing Corporation
Forming Department
For June
Quantity Schedule Material A Material B Labor Overhead Quantity
4,500
Ending inventory ..................................... 100% 0% 30% 30% 400
4,500
Material A ................................................................................... 2,805
Material B ................................................................................... 0
Labor........................................................................................... 1,250
Total cost in beginning inventory .................................... 10,352
Cost from preceding department............................................. $ 29,328 4,500 $ 7.50
Material A ................................................................................... 19,695 4,500 5.00
Material B ................................................................................... 10,250 4,100 2.50
Labor........................................................................................... 15,630 4,220 4.00
Total cost added during current period............................ $ 98,348
%
Material A .......................................... 400 100% 5.00 2,000
Material B .......................................... 400 0% 2.50 0
Labor.................................................. 400 30% 4.00 480
Factory overhead ............................. 400 30% 6.00 720 6,200
Prior Dept.
Cost Material A Material B Labor Overhead
Equivalent units transferred out............ 4,100 4,100 4,100 4,100 4,100
Equivalent units in ending inventory .... 400 400 0 120 120
Total equivalent units.............................. 4,500 4,500 4,100 4,220 4,220
6-8 Chapter 6

E6-8 Canoli Cola Company
Carbonation Department
For October
Beginning inventory ................................................ 1,000
Received from Syrup Department .......................... 2,000
Added to process in Carbonation Department ..... 6,000
9,000
Transferred to Bottling Department ....................... 7,800
Ending inventory ...................................................... 100% 25% 25% 1,200
9,000
Cost from preceding department ........................................... $ 1,120
Materials ..................................................................................... 140
Labor .......................................................................................... 65
Total cost in beginning inventory .................................... $ 1,445
Materials ..................................................................................... 1,210 9,000 .15
Labor........................................................................................... 1,960 8,100 .25
Factory overhead....................................................................... 3,120 8,100 .40
%
Transferred to Bottling Department ...... 7,800 100% $2.00 $15,600
Materials ........................................... 1,200 100% .15 180
Labor.................................................. 1,200 25% .25 75
Factory overhead ............................. 1,200 25% .40 120 1,815
Prior Dept.
Equivalent units in ending inventory .... 1,200 1,200 300 300
Chapter 6 6-9

E6-9 Menezes Chemical Company
Blending Department
For March
Beginning inventory................................................. 5,000
Received from Refining Department ...................... 20,000
Added to process in Blending Department ........... 5,000
30,000
Transferred to Finishing Department ..................... 26,000
Ending inventory ...................................................... 100% 80% 90% 4,000
30,000
Materials ..................................................................................... 2,415
Labor........................................................................................... 180
Total cost in beginning inventory .................................... $8,112
Materials ..................................................................................... 12,885 30,000 .51
Labor .......................................................................................... 2,740 29,200 .10
%
Materials ............................................ 4,000 100% .51 2,040
Labor.................................................. 4,000 80% .10 320
Factory overhead.............................. 4,000 90% .30 1,080 7,440
Prior Dept.
Equivalent units in ending inventory .... 4,000 4,000 3,200 3,600
6-10 Chapter 6

E6-10 APPENDIX
Shankar Manufacturing Company
Cutting Department
For July
Beginning inventory................................ 60% 20% 20% 100
Started in process this period ............... 900
1,000
Transferred to Assembly Department ... 850
1,000
Materials ..................................................................................... $2,940
Labor........................................................................................... 390
Factory overhead ...................................................................... 585
Materials ..................................................................................... $46,530 940 $49.50
Labor........................................................................................... 18,860 920 20.50
Factory overhead....................................................................... 27,150 905 30.00
Cost Accounted for as Follows Units Current % Unit Cost Total Cost
Transferred to Assembly Department:
Beginning inventory ........................ $3,915
Cost to complete:
Materials ............................... 100 40% $49.50 1,980
Labor..................................... 100 80% 20.50 1,640
Factory overhead................. 100 80% 30.00 2,400 $ 9,935
Started and completed this period . 750 100% 100.00 75,000
Total cost transferred to Assembly
Department ................................ $84,935
Materials ............................................ 150 100% $49.50 $7,425
Labor.................................................. 150 60% 20.50 1,845
Factory overhead ............................. 150 50% 30.00 2,250 11,520
*Number of equivalent units of cost added during the current period determined as follows:
To complete beginning inventory.......... 40 80 80
Started and completed this period........ 750 750 750
Ending inventory ..................................... 150 90 75
Total equivalent units.............................. 940 920 905
** Cost added during the current period divided by the number of equivalent units of cost added dur-
ing the current period
Chapter 6 6-11

E6-11 APPENDIX
Cantach Tool Company
Assembly Department
For November
Beginning inventory................................ 50% 40% 40% 1,200
4,000
Transferred to Finished Goods.............. 3,000
4,000
Cost from preceding department........................................... $ 17,280
Materials ..................................................................................... 5,550
Labor........................................................................................... 2,400
Materials ..................................................................................... 29,700 3,300 9.00
Labor........................................................................................... 16,932 3,320 5.10
6-12 Chapter 6

E6-11 APPENDIX (Concluded)
Transferred to Finished Goods:
Beginning inventory ......................... $28,830
Cost to complete:
Materials ............................... 1,200 50% $9.00 5,400
Labor..................................... 1,200 60% 5.10 3,672
Factory overhead................. 1,200 60% 7.65 5,508 $ 43,410
Started and completed this period 1,800 100% 36.25 65,250
Total cost transferred to Finished Goods $108,660
Materials ............................................ 1,000 90% 9.00 8,100
Labor ................................................. 1,000 80% 5.10 4,080
Prior Dept.
To complete beginning inventory.......... 0 600 720 720
Started and completed this period........ 1,800 1,800 1,800 1,800
Ending inventory ..................................... 1,000 900 800 800
Chapter 6 6-13

E6-12 APPENDIX
Southwell Chemical Corporation
Blending Department
For May
Received from Refining Department..... 5,000
Added to process in Blending Department 5,000
12,000
Transferred to Finished Goods ............. 10,500
12,000
Materials ..................................................................................... 500
Labor........................................................................................... 150
Materials ..................................................................................... 2,500 10,000 .25
Labor........................................................................................... 3,300 11,000 .30
6-14 Chapter 6

E6-12 APPENDIX (Concluded)
Cost to complete:
Materials ............................... 2,000 0% $ .25 0
Labor .................................... 2,000 80% .30 480
Factory overhead................. 2,000 60% .70 840 $ 5,030
Total cost transferred to Finished
Goods .......................................... $26,280
Materials ............................................ 1,500 100% .25 375
Labor.................................................. 1,500 60% .30 270
Factory overhead.............................. 1,500 80% .70 840 3,360
Prior Dept.
To complete beginning inventory.......... 0 0 1,600 1,200
Started and completed this period........ 8,500 8,500 8,500 8,500
Ending inventory ..................................... 1,500 1,500 900 1,200
Chapter 6 6-15

PROBLEMS
P6-1
(1) Meninquez Cabinet Company
Cutting Department
For August
Started in process this period .............. 600
800
Transferred to Assembly Department ... 650
Ending inventory ..................................... 90%. 60% 60% 150
800
Materials ..................................................................................... $ 5,365
Labor........................................................................................... 530
Total cost in beginning inventor........................................ $6,690
Materials ..................................................................................... $26,035 785 $ 40.00
Labor........................................................................................... 8,350 740 12.00
Total cost charged to department.................................................. $53,600 $ 70.00
%
Transferred to Assembly Department ... 650 100% $70.00 $45,500
Materials ............................................ 150 90% $40.00 $5,400
Labor.................................................. 150 60% 12.00 1,080
Equivalent units transferred out ..... 650 650 650
Equivalent units in ending inventory 135 90 90
Total equivalent units ....................... 785 740 740
6-16 Chapter 6

P6-1 (Continued)
Meninquez Cabinet Company
Assembly Department
For August
Received from Cutting Department....... 650
900
Transferred to Finished Goods.............. 800
900
Materials .................................................................................... 3,451
Labor........................................................................................... 3,611
Total cost in beginning inventory .................................... $ 28,083
Cost from preceding department............................................. $ 45,500 900 $ 69.90
Materials .................................................................................... 14,273 840 21.10
Labor........................................................................................... 20,989 820 30.00
Total cost added during current period ......................... $101,751
Chapter 6 6-17

P6-1 (Concluded)
%
Transferred to Finished Goods.............. 800 100% $151.00 $120,800
Materials ............................................ 100 40% 21.10 844
Labor.................................................. 100 20% 30.00 600
Factory overhead.............................. 100 20% 30.00 600 9,034
Prior Dept.
Equivalent units transferred out ..... 800 800 800 800
Equivalent units in ending inventory 100 40 20 20
Total equivalent units ....................... 900 840 820 820
(2) Work in Process—Cutting Department ...................... 26,035
Work in Process—Assembly Department.................. 14,273
Materials .............................................................. 40,308
Work in Process—Cutting Department ...................... 8,350
Payroll .................................................................. 29,339
Applied Factory Overhead.................................. 33,514
Work in Process—Cutting Department ............. 45,500
Finished Goods Inventory ........................................... 120,800
Work in Process—Assembly Department ........ 120,800
6-18 Chapter 6

P6-2
(1) Rimirez Tool Corporation
Casting Department
For December
Started in process this period .............. 8,000
9,000
9,000
Materials ..................................................................................... $915
Labor........................................................................................... 60
Materials ..................................................................................... $17,085 9,000 $2.00
Labor........................................................................................... 4,290 8,700 .50
%
Materials ............................................ 1,500 100% $2.00 $3,000
Labor.................................................. 1,500 80% .50 600
Equivalent units transferred out ............................. 7,500 7,500 7,500
Equivalent units in ending inventory...................... 1,500 1,200 1,200
Total equivalent units............................................... 9,000 8,700 8,700
Chapter 6 6-19

P6-2 (Continued)
Rimirez Tool Corporation
Finishing Department
For December
Quantity Schedule Labor Overhead Quantity
Beginning inventory 1,500
Received from Casting Department ......................... 7,500
9,000
Transferred to Finished Goods ................................ 7,000
Ending inventory ........................................................ 40% 50% 2,000
9,000
Labor........................................................................................... 201
Labor........................................................................................... 2,919 7,800 .40
6-20 Chapter 6

P6-2 (Concluded)
%
Labor.................................................. 2,000 40% .40 320
Prior Dept.
Cost Labor Overhead
Equivalent units transferred out......................... 7,000 7,000 7,000
Equivalent units in ending inventory ................. 2,000 800 1,000
Total equivalent units ......................................... 9,000 7,800 8,000
(2) Work in Process—Casting Department...................... 17,085
Materials .............................................................. 17,085
Work in Process—Casting Department...................... 4,290
Work in Process—Finishing Department................... 2,919
Payroll .................................................................. 7,209
Work in Process—Casting Department ............ 24,375
Work in Process—Finishing Department.......... 28,700
Chapter 6 6-21

P6-3
(1) Jetter Engine Corporation
Casting Department
For February
3,500
Transferred to Assembly Department ... 2,700
3,500
Materials ..................................................................................... $ 10,925
Labor........................................................................................... 338
Factory overhead ...................................................................... 2,839
Materials ..................................................................................... $146,575 3,500 $ 45.00
Labor........................................................................................... 16,362 3,340 5.00
%
Transferred to Assembly Department ... 2,700 100% $65.00 $175,500
Materials ........................................... 800 100% $45.00 $36,000
Labor.................................................. 800 80% 5.00 3,200
Equivalent units transferred out ............................... 2,700 2,700 2,700
Equivalent units in ending inventory........................ 800 640 720
Total equivalent units ................................................ 3,500 3,340 3,420
6-22 Chapter 6

P6-3 (Continued)
Jetter Engine Corporation
Assembly Department
For February
Received from Casting Department ..... 2,700
3,700
3,700
Materials ..................................................................................... 40,258
Labor .......................................................................................... 12,426
Total cost in beginning inventory.................................... $128,260
Materials ..................................................................................... 116,480 3,460 45.30
Labor........................................................................................... 44,408 3,140 18.10
%
Work in Process, ending inventory
Cost from preceding department.... 800 100% $ 64.50 $51,600
Materials ............................................ 800 70% 45.30 25,368
Labor.................................................. 800 30% 18.10 4,344
Prior Dept.
Equivalent units in ending inventory .... 800 560 240 240
Chapter 6 6-23

P6-3 (Continued)
Jetter Engine Corporation
For February
Quantity Schedule Labor Overhead Quantity
Beginning inventory ................................................... 300
Received from Assembly Department...................... 2,900
3,200
Transferred to Finished Goods ................................ 2,800
Ending inventory......................................................... 50% 50% 400
3,200
Labor........................................................................................... 2,760
Total cost in beginning inventory ................................... $ 49,740
Cost from preceding department............................................. $423,400 3,200 $ 145.70
Labor........................................................................................... 12,240 3,000 5.00
Total cost charged to department ................................................. $503,740 $ 158.20
%
Transferred to Finished Goods.............. 2,800 100% $ 158.20 $442,960
Cost from preceding department.... 400 100% $ 145.70 $58,280
Labor.................................................. 400 50% 5.00 1,000
Prior Dept.
Cost Labor Overhead
Equivalent units transferred out ............................... 2,800 2,800 2,800
Equivalent units in ending inventory........................ 400 200 200
Total equivalent units ................................................. 3,200 3,000 3,000
6-24 Chapter 6

P6-3 (Concluded)
(2) Work in Process—Casting Department...................... 146,575
Materials ............................................................... 263,055
Payroll .................................................................. 73,010
Work in Process—Casting Department............. 175,500
Work in Process—Assembly Department......... 423,400
Finished Goods inventory ........................................... 442,960
Chapter 6 6-25

P6-4
(1) Peneli Cologne Company
Blending Department
For June
7,000
7,000
Materials ..................................................................................... $ 19,620
Labor........................................................................................... 944
Materials ..................................................................................... $129,100 6,760 $22.00
Labor........................................................................................... 6,880 6,520 1.20
Total cost added during current period ........................... $165,045
%
Materials ............................................ 600 60% $22.00 $7,920
Labor.................................................. 600 20% 1.20 144
Factory overhead.............................. 600 25% 4.80 720 8,784
Equivalent units transferred out......................... 6,400 6,400 6,400
Equivalent units in ending inventory ................. 360 120 150
Total equivalent units........................................... 6,760 6,520 6,550
6-26 Chapter 6

P6-4 (Continued)
Peneli Cologne Company
For June
Beginning inventory ................................................... 1,400
Received from Blending Department ...................... 6,400
Added to process in Finishing Department............. 19,200
27,000
Transferred to Finished Goods ................................. 26,000
Ending inventory ....................................................... 100% 70% 70% 1,000
27,000
Materials ..................................................................................... 1,395
Labor........................................................................................... 106
Materials ..................................................................................... 28,305 27,000 1.10
Labor........................................................................................... 19,919 26,700 .75
Chapter 6 6-27

P6-4 (Concluded)
%
Cost from preceding department.... 1,000 100% $ 6.95 $6,950
Materials ............................................ 1,000 100% 1.10 1,100
Labor.................................................. 1,000 70% .75 525
Prior Dept.
Equivalent units in ending inventory .... 1,000 1,000 700 700
(2) Work in Process—Blending Department ................... 129,100
Materials .............................................................. 157,405
Work in Process—Blending Department ................... 6,880
Payroll................................................................... 26,799
Applied Factory Overhead ................................. 89,816
Work in Process—Blending Department .......... 179,200
Finished Goods inventory ........................................... 288,600
6-28 Chapter 6

P6-5
(1) Hi-tech Chemical Corporation
Refining Department
For March
Beginning inventory .................................................. 800
Started in process this period................................... 7,200
8,000
Transferred to Blending Department ........................ 7,000
Ending inventory......................................................... 100% 75% 50% 1,000
8,000
Materials ..................................................................................... $728
Labor........................................................................................... 30
Total cost in beginning inventory .................................... $818
Materials .................................................................................... $7,272 8,000 $ 1.00
Labor .......................................................................................... 1,520 7,750 .20
Total cost charged to department ................................................. $12,550 $ 1.60
%
Transferred to Blending Department..... 7,000 100% $1.60 11,200
Materials ............................................ 1,000 100% $1.00 $1,000
Labor ................................................. 1,000 75% .20 150
Equivalent units transferred out............ 7,000 7,000 7,000
Equivalent units in ending inventory .... 1,000 750 500
Total equivalent units.............................. 8,000 7,750 7,500
Chapter 6 6-29

P6-5 (Continued)
Hi-tech Chemical Corporation
Blending Department
For March
Received from Refining Department .... 7,000
Added to process in Blending Department 1,800
10,200
Transferred to Finished Goods ............. 9,200
10,200
Materials ..................................................................................... 620
Labor........................................................................................... 68
Materials .................................................................................... 4,380 10,000 .50
Labor........................................................................................... 3,100 9,600 .33
Total cost added during current period ........................... $24,280
6-30 Chapter 6

P6-5 (Concluded)
%
Materials ............................................ 1,000 80% .50 400
Labor ................................................. 1,000 40% .33 132
Prior Dept.
Equivalent units transferred out ..... 9,200 9,200 9,200 9,200
Equivalent units in ending inventory 1,000 800 400 400
Total equivalent units ....................... 10,200 10,000 9,600 9,600
(2)
Work in Process—Refining Department .................... 7,272
Materials ............................................................... 11,652
Payroll................................................................... 4,620
Applied Factory Overhead ................................. 8,540
Work in Process—Refining Department .......... 11,200
Work in Process—Blending Department ......... 24,840
Chapter 6 6-31

P6-6 APPENDIX
(1) Upton Manufacturing Company
Cutting Department
For October
10,000
Transferred to Assembly Department ... 8,500
10,000
Materials ..................................................................................... $8,010
Labor........................................................................................... 1,750
Materials ..................................................................................... $ 81,900 9,100 $ 9.00
Labor........................................................................................... 18,600 9,300 2.00
Transferred to Assembly Department:
Cost to complete:
Materials ............................... 1,000 10% $ 9.00 900
Labor..................................... 1,000 60% 2.00 1,200
Started and completed this period . 7,500 100% 15.00 112,500
Total cost transferred to Assembly
Department ................................. $128,350
Materials ............................................ 1,500 100% $ 9.00 $13,500
Labor.................................................. 1,500 80% 2.00 2,400
6-32 Chapter 6

P6-6 APPENDIX (Continued)
* Number of equivalent units of cost added during the current period determined as follows:
To complete beginning inventory ... 100 600 800
Started and completed this period 7,500 7,500 7,500
Ending inventory............................... 1,500 1,200 1,500
Total equivalent units ....................... 9,100 9,300 9,800
Chapter 6 6-33

Upton Manufacturing Company
Assembly Department
For October
10,500
Transferred to Finished Goods Inventory 9,500
10,500
Materials ..................................................................................... 400
Labor........................................................................................... 800
Materials ..................................................................................... 30,100 8,600 3.50
Labor........................................................................................... 21,315 8,700 2.45
Beginning inventory ........................ $ 6,800
Cost to complete:
Materials ............................... 2,000 25% $ 3.50 1,750
Labor..................................... 2,000 40% 2.45 1,960
Started and completed this period . 7,500 100% 24.50 183,750
Goods .......................................... $197,020
Materials ............................................ 1,000 60% 3.50 2,100
Labor.................................................. 1,000 40% 2.45 980
6-34 Chapter 6

P6-6 APPENDIX (Concluded)
Prior Dept.
To complete beginning inventory ... 0 500 800 800
Started and completed this period 7,500 7,500 7,500 7,500
Ending inventory............................... 1,000 600 400 400
Total equivalent units ...................... 8,500 8,600 8,700 8,700
(2) Work in Process—Cutting Department ...................... 81,900
Materials .............................................................. 112,000
Payroll .................................................................. 39,915
Work in Process—Cutting Department ............. 128,350
Work in Process—Assembly Department ........ 197,020
Chapter 6 6-35

P6-7 APPENDIX
(1) Felicia Manufacturing Company
Fabricating Department
For August
Started in process this period .............. 1,200
1,600
1,600
Materials ..................................................................................... $ 29,280
Labor........................................................................................... 1,900
Materials .................................................................................... $90,000 1,200 $ 75.00
Labor........................................................................................... 16,080 1,340 12.00
6-36 Chapter 6

Transferred to Finishing Department:
Cost to complete:
Materials ............................... 400 0% $ 75.00 0
Labor..................................... 400 60% 12.00 2,880
Factory overhead................. 400 20% 38.00 3,040 $ 48,900
Started and completed this period 700 100% 125.00 87,500
Total cost transferred to Finishing
Department ................................. $136,400
Materials ............................................ 500 100% $ 75.00 $37,500
Labor.................................................. 500 80% 12.00 4,800
To complete beginning inventory....................... 0 240 80
Started and completed this period..................... 700 700 700
Ending inventory.................................................. 500 400 450
Total equivalent units........................................... 1,200 1,340 1,230
Chapter 6 6-37

Felicia Manufacturing Company
For August
Received from Fabricating Department 1,100
1,700
Transferred to Finished Goods Inventory 1,300
1,700
Materials .................................................................................... 230
Labor........................................................................................... 1,600
Total cost in beginning inventory ................................... $ 78,350
Materials ..................................................................................... 2,920 1,460 2.00
Labor........................................................................................... 19,880 1,420 14.00
Cost to complete:
Materials ............................... 600 60% $ 2.00 720
Labor..................................... 600 80% 14.00 6,720
Factory overhead ................ 600 80% 20.00 9,600 $ 95,390
Started and completed this period . 700 100% 160.00 112,000
Goods .......................................... $207,390
Materials ............................................ 400 100% 2.00 800
Labor.................................................. 400 60% 14.00 3,360
Factory overhead ............................. 400 60% 20.00 4,800 58,560
6-38 Chapter 6

6-7 APPENDIX (Concluded)
Prior Dept.
Started and completed this period 700 700 700 700
Ending inventory............................... 400 400 240 240
(2) Work in Process—Fabricating Department ............... 90,000
Materials .............................................................. 92,920
Work in Process—Fabricating Department ............... 16,080
Payroll .................................................................. 35,960
Work in Process—Fabricating Department ............... 46,740
Work in Process—Fabricating Department ...... 136,400
Work in Process-Finishing Department ............ 207,390
Chapter 6 6-39

P6-8 APPENDIX
(1) Tatanach Beverage Company
Mashing Department
For September
3,600
Transferred to Blending Department..... 3,100
3,600
Materials ..................................................................................... $ 1,088
Labor........................................................................................... 172
Materials ..................................................................................... $ 6,006 2,860 $2.10
Labor........................................................................................... 1,470 2,940 .50
6-40 Chapter 6

Transferred to Blending Department:
Cost to complete:
Materials ............................... 600 10% $2.10 126
Labor..................................... 600 40% .50 120
Factory overhead................. 600 70% 1.00 420 $ 2,098
Total cost transferred to Blending
Department ................................. $11,098
Materials ............................................ 500 60% $2.10 $ 630
Labor.................................................. 500 40% .50 100
Factory overhead.............................. 500 20% 1.00 100 830
To complete beginning inventory ... 60 240 420
Started and completed this period . 2,500 2,500 2,500
Ending inventory............................... 300 200 100
Total equivalent units ....................... 2,860 2,940 3,020
Chapter 6 6-41

Tatanach Beverage Company
Blending Department
For September
Beginning inventory ................................................... 50% 20% 20% 1,000
Received from Mashing Department ........................ 3,100
Added to process in Blending Department ............. 3,100
7,200
Transferred to Finished Goods Inventory ............... 6,400
Ending inventory......................................................... 100% 60% 60% 800
7,200
Materials ..................................................................................... 100
Labor........................................................................................... 55
Materials ..................................................................................... 1,407 6,700 .21
Labor........................................................................................... 2,004 6,680 .30
Cost to complete:
Materials ............................... 1,000 50% $ .21 105
Labor..................................... 1,000 80% .30 240
Factory overhead................. 1,000 80% .40 320 $ 2,664
Goods .......................................... $17,244
Materials ............................................ 800 100% .21 168
Labor.................................................. 800 60% .30 144
Factory overhead.............................. 800 60% .40 192 1,936
6-42 Chapter 6

P6-8 APPENDIX (Concluded)
Prior Dept.
Started and completed this period 5,400 5,400 5,400 5,400
Ending inventory............................... 800 800 480 480
(2) Work in Process—Mashing Department .................... 6,006
Materials .............................................................. 7,413
Work in Process—Mashing Department .................... 1,470
Payroll .................................................................. 3,474
Work in Process—Mashing Department .................... 3,020
Work in Process—Mashing Department ........... 11,098
Work in Process—Blending Department .......... 17,244
Chapter 6 6-43

Ch06 Managerial accounting aiou mba mcom 8508

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