Problem A.

PORT HYIR Manufacturing Company using process costing to account for its
production process:
• Production begins in department 1 where materials are added at the start of the
process. Goods are afterwards transferred to department 2 where additional materials
are added after inspection.
• Inspection takes place at the end of the process for department 1, and at 90% progress
for department 2.
• Department 1 uses FIFO costing method while department 2 uses weighted average
costing method.

The production data for the current month shows the following information:
Department 1 Department 2
UNITS:
WIP, beginning 20,000 (80% incomplete) 10,000 (20% incomplete)
WIP, ending 30,000 (2/3 complete) 17,500 (5/7 complete)
Started in 150,000 ?
production
Normal spoilage 4% of units started in 2,500
process
Abnormal spoilage ¼ of normal spoilage 1,250

Cost of WIP, beg

Transferred in ? 285,450
Materials 135,000 214,875
Conversion cost 97,500 280,725

Current cost
Transferred in ? ?
Materials 1,980,000 840,000
Conversion cost 3,088,800 1,282,500

1. How much is the total costs transferred to department 2?

a. 4,227,300 b. 4,261,800 c. 4,459,800 d. 5,000,000

2. How much is the ending work in process in department 1?

a. 396,000 b. 549,300 c. 600,000 d. 792,000

3. How much is the cost of goods manufactured?

a. 6,000,000 b. 6,474,750 c. 6,583,650 d. 7,000,000

Problem B. La Spush Company uses the weighted average method of process costing to
account for its operations. It adds direct materials at the beginning of the process. Any loss less
than 10% of the units started in production is within the tolerance level. Data for the current
month are as follows:
Beginning work in process (45% complete) 36,000 units
Units started during the month 120,000 units
Units transferred to finished goods inventory 126,000 units
Ending work in process (15% complete) 21,600 units
Lost units ? units
 Cost of BWIP Current Cost

Direct materials P101,840 P400,000

Conversion cost P110,820 P600,000

1. How much should be expensed outright?

a. 0 b. 32,040 c. 74,760 d. 106,800

2. How much is the cost of ending work in process?

a. 192,240 b. 91,260 c. 24,533 d. 0

Problem C. GRDWTNG Company produces two products from a joint process: X and Z. Joint
processing costs for this production cycle are P8,000.

Sales price per yard Disposal cost per Further Processing Final sale price
Yards
at split-off yard at split-off per yard per yard

X 1,500 P6.00 P3.50 P1.00 P 7.50

Z 2,200 9.00 5.00 3.00 11.25

If X and Z are processed further, no disposal costs will be incurred or such costs will be borne by
the buyer.

1. If the company opted to use the physical measure to allocate the joint cost, what is the
gross profit / (loss) of product X at split-off?
a. 5,757 b. 507 c. 4,257 d. (993)

2. If the company opted to use the NRV at split-off to allocate the joint cost, what is the
gross profit / (loss) of product Z at split-off?
a. 3,190 b. (3,410) c. 14,190 d. 12,540

Problem D. The Dream Inc. manufactures three joint products. The following production data
were provided by The Dream Inc. for the current period:

Product Name Units Produced Additional Processing Final Selling Price

Cost after Split Off

Xen 1,000 P20,000 P50

Yen 2,000 10,000 10
Zen 3,000 30,000 30

Joint product costs for the current period were as follows:

Raw materials P10,000

Direct labor 15,000
Factory overhead 25,000

The company uses the net realizable value method for allocating joint costs.

1. What is the Gross profit/(loss) on the sale of all Xen products?

a. 30,000 b. 21,667 c. 15,000 d. 5,000
 2. What is the total gross profit/(loss) on the sale of all the joint products?
a. 40,000 b. 60,000 c. 50,000 d. 30,000

Problem E. Real World Corp. produces a main product Z together with a by-product X. There was
no beginning inventory during the current month. The following information were available:

Produced Sold

Z 1,000 800
X 250 75

Joint cost amounted to P125,000 during the month. One unit of Z can be sold for P200, and
one unit of X can be sold for P100 after incurring P20 disposal cost.

Operating expenses amounted to P10,000

1. How much is the net income if the NRV of the by-product is recognized when sold and is
treated as additional sales revenue?
a. 50,000 b. 56,000 c. 57,500 d. 70,000

2. How much is the net income if the NRV of the by-product is recognized when sold and is
treated as a reduction to cost?
a. 50,000 b. 54,800 c. 56,000 d. 57,500

3. How much is the net income if the by-product is recognized when produced using the net
realizable value method?
a. 45,000 b. 54,800 c. 66,000 d. 70,000

4. Assume that the by-product X can be sold for P100 after incurring P20 disposal cost for a
normal profit of 20% of sales. Additional total manufacturing costs of P1,000 for direct
materials and P4,000 for conversion costs will be incurred after separation. How much is
the gross profit from sale of product Z if by-product is recognized when produced, using
the reversal cost method?
a. 60,000 b. 64,800 c. 76,000 d. 68,000