Chapter 7 – PROCESS COSTING

Name: __________________________________________ Score: _____________

Class Schedule: ___________________________________ Date : _____________
Exercise 7-14 (Multiple Choice)

Instruction: Encircle the letter of your chosen answer.

1. A process costing system is used by a company that

a. produces heterogeneous products
b. produces homogeneous products.
c. produces items by special request of customers
d. accumulates costs by job.

2. The FIFO method of process costing will produce the same cost of goods transferred out
amount as the weighted average method when
a. the goods produced are homogeneous.
b. there is no beginning work in process inventory
c. there is no ending work in process inventory.
d. beginning and ending work in process inventories are each 50% complete.

3. Which of the following is (are) the same between the weighted average & FIFO methods
of calculating equivalent production?
Units to account for EP calculations Total Cost to account for
a. No Yes No
b. Yes Yes Yes
c. Yes No No
d. Yes No Yes

4. Which of the following is subtracted from EP under weighted average to obtain EP under
FIFO?
a. beginning WIP EUP completed in current period.
b. beginning WIP EUP produced in prior period.
c. ending WIP EUP not completed.
d. ending WIP EUP completed.

5. Which of the following statement/s is/are true?

I. In a process costing system, units transferred to the next processing department
are presumed to be 100% complete with respect to the work performed by the
transferring department.
II. Under the weighted-average method, the equivalent units used to compute the unit
costs of ending inventories relate only to work done during the current period.

a. Statement I only. c. Neither Statement I nor Statement II

b. Statement II only. d. Both Statement I and Statement II

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Name: _________________________________________________Score: _____________

Class Schedule: _________________________________________ Date : _____________

6. Which of the following statements related to job-order costing and process costing are
true?
a. Under both costing methods, manufacturing overhead costs are included in the
computation of unit product costs.
b. Under both costing methods, the journal entry to record the completion of
production will involve crediting a work in process inventory account.
c. Under both costing methods, the journal entry to record the cost of goods sold will
involve crediting the finished goods inventory account.
d. All of the above statements are true.

7. The purpose of the equivalent-unit computation is to:

a. convert completed units into the amount of partially completed output units that
could be made with that quantity of input.
b. assist the business in determining ending inventory.
c. convert partially completed units into the amount of completed output units that
could be made with that quantity of input.
d. Both b and c are correct.

8. Which of the following statements about operation costing is (are) true?

I. Conversion costs are accumulated by department.
II. Direct material costs are accumulated by batch.
III. Operation costing is a hybrid product-costing system.

a. I and II b. I and III. c. II and III. d. I, II and III.

9. Which of the following best describes the procedures used in operation costing to assign
direct-material and conversion costs to production?
Direct-Material Costs Conversion Costs
a. the same as those in job order costing the same as those in job order costing
b. the same as those in job order costing the same as those in process costing
c. the same as those in process costing the same as those in job order costing
d. the same as those in process costing the same as those in process costing

10. Shrinkage should be treated as

a. defective units c. miscellaneous expense
b. spoiled units d. a reduction of overhead

11. Sixty percent of materials are added when the goods are ¼ done and the remainder,
when they are ¾ done. EP for materials is 20,000 and for conversion cost, 20,500.
There are 2,000 units in the ending WIP, ¼ done. WIP, beginning, was 4/5 done.
Normal loss at the beginning is 500 units. Unit cost from preceding department was
P10.40. In this department, unit cost was P3 for materials and P2 for conversion cost.
How much is the unit cost for every lost unit?
a. P.26 b. P.25 c. P.385 d. P.50

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Name: ______________________________________________ Score: _____________

Class Schedule: _____________________________________ Date : _____________

12. Energen Products transferred 20,000 units to one department. An additional 10,000
units were in beginning inventory in that department. At the end of the month, 15,000
units were transferred out to the next department, 8,000 units remained in work in
process, 40% complete as to conversion costs and the remaining units were lost at the
75% stage of conversion. Beginning inventory was 60% complete as to conversion
costs and lost units were the result of internal failure. The equivalent units of
conversion cost using FIFO costing is:
a. 12,200 b. 17,450 c. 18,200 d. 24,200

13. Primex Manufacturing Co. transferred 15,000 units to one department. An additional
5,000 units were added in that department. At the end of the month, 12,000 units were
transferred out to the next department, 6,000 units remained in work in process, 40%
complete as to conversion costs and the remaining units were lost at the 75% stage of
conversion. Beginning inventory was 60% complete as to conversion costs, and lost
units were the result of normal production shrinkage. The equivalent units of conversion
cost using FIFO method is:
a. 11,400 b. 12,900 c. 13,400 d. 14,400

14. In manufacturing its products for the month of March, Vitality Co. incurred normal
production shrinkage of P10,000 and spoilage due to internal failure of P12,000. How
much spoilage cost should Vitality Co. charge to Factory Overhead Control for the
month of March?
a. P – 0 - b. P 10,000 c. P 12,000 d. P 22,0000

15. Bora, Inc. instituted a new process in January. During January, 10,000 units were
started in Department A. Of the units started, 1,000 were lost in the process due to
normal production shrinkage, 7,000 were transferred to Department B, and 2,000
remained in work in process at January 31. The work in process at January 31 was
100% complete as to material costs and 50% complete as to conversion costs. Material
costs of P27,000 and conversion costs of P40,000 were charged to Department A in
January. What were the total costs transferred to Department B?
a. P 46,900 b. P 53,600 c. P 56,000 d. P 57,120

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Name: ______________________________________________ Score: _____________

Class Schedule: _____________________________________ Date : _____________

Problem 7-A (Preparation of CPR in one production department; FIFO vs. Weighted
Average)

Dico Phil Inc. produces maong gloves in a single-process production system. The company’s
accounting records in June, 2023 reflected the following:

Work in process, beginning (all materials; 30% labor; 60% overhead) 42,000 units
Units started during the month ………………………………………………………………. 60,000 units
Work in process, end (all materials; 40% labor; 80% overhead) ………… 30,000 units

Cost Component June 1 During June_

Direct Materials P 32,400 P 90,000
Direct Labor 14,070 32,130
Factory Overhead 35,580 46,020

REQUIRED: Prepare a Cost of Production Report for the month of June assuming the use
of:
a. weighted average method.
b. FIFO method.

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Name: ______________________________________________ Score: _____________

Class Schedule: _____________________________________ Date : _____________

Problem 7-B (Preparation of CPR with journal entries using FIFO method)

Mitando Co. produces a single model of a multi-purpose ergonomic stool. The company uses
a process costing system, with First-In-First-Out (FIFO) method of inventory costing, and
maintains a separate work in process account for each of its two (2) producing
departments, Cutting and Assembly. The ergonomic stool are made of pure polypropylene
raw material and metal cut in the Cutting Department and then transferred to the Assembly
Department, where they are put together with the addition of springs, hinges, and wheels
purchased from outside vendors. Data related to operations in September are:
Cutting Assembly
Units started last month:
Cutting (80% materials, 50% labor, and 30% overhead) 10,000
Assembly (60% materials, 30% labor and overhead) 5,000
Units started in process in Cutting Department this month 30,000
Units transferred from Cutting to Assembly this month 25,000
Units transferred from Assembly to warehouse this month 18,000
Units still in process at the end of the month:
Cutting (100% materials, 80% labor, 60% overhead) 15,000
Assembly (80% materials, 40% labor and overhead) 12,000
Cutting Assembly
Cost incurred last month:
Cost from preceding department P10,000
Materials P80,100 1,000
Labor 17,500 2,000
Factory overhead 7,900 4,000
Costs added this month:
Materials 288,000 98,400
Labor 64,000 42,600
Factory overhead 124,000 75,402

REQUIRED: Prepare the:

1. September Cost of Production Report (CPR) for each department.
2. Appropriate general journal entries for both producing departments at the end of the
month.

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Name: ___________________________________________ Score: _____________

Class Schedule: ________________________________________ Date : _____________

Problem 7-C (Preparation of CPR using Weighted Average method)

Robusta Coffee Co. roasts and packs coffee beans. The process begins in the Roasting
Department, after which the coffee beans are transferred to the Packing Department. The
following is a partial WIP account of the Roasting Department at July 31, 2023:

Account: Work in Process – Roasting Department Account # 3045

BALANCE
2023 I T E M PR Debit Credit Debit Credit
July 1 Balance: 25,000 units, 45% complete P640,000*
31 Direct Materials, 325,000 units 325,000 965,000
31 Direct Labor 300,000 1,265,000
31 Factory Overhead 360,000 1,625,000
31 Goods finished, 250,000 units ? ?
31 Balance ______units, 75% complete ?

Costs incurred last month were as follows: Materials P 325,000; Direct Labor P 90,000 and
Factory Overhead P 225,000.

REQUIRED: Prepare a Cost of Production Report using weighted average and identify the
amounts for WIP-Roasting Department.

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Name: __________________________________________ Score: _____________

Class Schedule: ____________________________________ Date : _____________

Problem 7-D (Preparation of CPR using FIFO method)

The Work in Process accounts of Crunchy Cookie Co. that pertain to the making of "Tasty
Snacks," a new cookie, during the month of August are presented below.

Work in Process - Mixing

Aug. 31 Materials 50,000 Aug. 31 Transferred out 120,000
Labor 18,800
Overhead 54,400

Work in Process - Baking

Aug. 1 Inventory 2,700 Aug. 31 Transferred out 183,600
31 Labor 10,600
31 Overhead 50,300
31 Transferred In 120,000

Work in Process - Packaging

Aug. 1 Inventory 5,370 Aug. 31 To Finished Goods ?
31 Materials 4,480
31 Labor 8,740
31 Overhead 28,370
31 Transferred in 183,600

Production and inventory data for the Baking and Packaging Departments are as follows:
Inventory, August 1 Inventory, August 31
Department Units %complete Units %Complete Transferred Out
Baking 24,000 25 -0- ---- 1,224,000
Packaging 30,000 30 40,000 80 1,214,000

All materials are applied at the beginning of the process.

REQUIRED: Prepare the Cost of Production Report for the month of August using FIFO
method for Baking and Packaging Departments.

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Name: ____________________________________________ Score: _____________

Class Schedule: ______________________________________ Date : _____________

Problem 7-E (Preparation of CPR using Weighted Average Method)

The following data pertain to Jarina Milling Company for the month of October:

Units in process, beginning (25% complete as to conversion costs) ?

Units started during October ……………………………………………………………. 80,000
Total units to account for ……………………………………………………………….… 100,000
Units completed and transferred out during October …………………………… ?
Units still in process on October 31 (80% complete as to conversion costs) 16,000
Total equivalent units: direct materials ………………………………………………… 100,000
Total equivalent units: conversion costs ………………………………………………. ?
Work in process, October 1: direct materials …………………………………………. P250,000
Work in process, October 1: conversion costs ……………………………………….. ?
Costs incurred during October: direct materials ……………………………………… ?
Costs incurred during October: conversion costs ……………………………………. 600,000
Work in process, October 1: total cost …………………………………………………. 739,000
Total costs incurred during October …………………………………………………….. 1,325,000
Total costs to account for ………………………………………………………………… 2,064,000
Cost per equivalent unit: direct materials ………………………………………………. 9.75
Cost per equivalent unit: conversion costs …………………………………………….. ?
Total cost per equivalent unit …………………………………………………………….. 21.00
Cost of goods completed and transferred out during October …………………… ?
Cost remaining in ending work in process inventory: direct material ………… ?
Cost remaining in ending work in process inventory: conversion costs ……… 144,000
Total cost of October 31 work in process ………………………………………………. 300,000

Additional information:
a. Jarina Milling Company is using weighted average method.
b. Material is added at the beginning of the manufacturing process and conversion costs are
applied evenly throughout the process.

REQUIRED: Prepare the October Cost of Production Report and compute the missing
amounts.

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Name: _________________________________________________Score: _____________

Class Schedule: _________________________________________ Date : _____________

Problem 7-F (CPR with Normal Continuous Spoilage and Abnormal Spoilage)

The following information is available from Farley Co. for January, 2024. All materials are
added at the start of production.
Beginning Work in Process: (80% complete) 8,000 units
Started 35,000units
Normal spoilage (continuous) 6,000 units
Abnormal spoilage 2,500 units
Ending Work in Process: (55% complete) 15,000units
Transferred out 19,500units
Beginning Work in Process Costs:
Material P 14,000
Conversion 45,000
Current Costs:
Material 50,000
Conversion 175,000
Total Costs P 284,000

Required: Prepare a cost of production report for January using FIFO.

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Name: _________________________________________________Score: _____________

Class Schedule: _________________________________________ Date : _____________

Problem 7-G (CPR with accretion; using Weighted Average method)

Barley Company produces organic barley juice drinks in three departments, Syrup, Mixing,
and Bottling. Syrup, which gives the juice drink its flavor, is produced in the first
department. The syrup is then transferred to the second department, where water with
sucralose is added to give the drink its fizz. After the water has been added, the liquid drink
is bottled. A process costing system using weighted average cost flow assumption is used to
account for work in process inventories. Data related to operations in the Mixing
Department during October are:
Units in beginning inventory 1,000
Units received from the Syrup Department this month 2,000
Units added to process in the Mixing Department this month 6,000
Units transferred to Bottling Department this month 7,800
Units in ending inventory (100% materials; 25% conversion costs) 1,200

Beginning Added
Inventory This Month
Costs charged to the Mixing Department:
Costs from Syrup Department P 1,120 P 9,680
Materials 190 1,610
Direct labor 60 1,560
Factory overhead 120 3,120

Required: Prepare a Cost of Production Report in October of the current year for the Mixing
Department.

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Name: _________________________________________________Score: _____________

Class Schedule: _________________________________________ Date : _____________

Problem 7-H (CPR with accretion; using FIFO method)

Herbacin Products Company produces a chemical preservative in two departments, Refining

and Blending. The process begins in the Refining Department, where the liquid chemical
base is removed from a crude chemical stock purchased from a large domestic chemical
company. The liquid base is then transferred to the Blending Department, where other
chemicals are added, which increase the total quantity of the product. The blended product
is then transferred to the warehouse to await sale and shipment to customers. Materials are
added at the beginning of the process in the Blending Department. At the end of April,
there were 2,000 units in process in the Blending Department, 20% complete as to labor
and 40% complete as to overhead. During May, 5,000 units were received from the
Refining Department, and a sufficient quantity of materials was added in the Blending
Department to double the quantity of units in process. At the end of May, there were 1,500
units still in process, 60% complete as to labor and 80% complete as to overhead. Cost
data related to May operations in the Blending Department are:
Beginning Added
Inventory This Month
Costs charged to the department:
Costs from the preceding department P2,460 P12,500
Materials 500 2,500
Direct labor 150 3,300
Factory overhead 600 7,630
P 3,710 P29,640

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

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Name: _________________________________________________Score: _____________

Class Schedule: _________________________________________ Date : _____________

Problem 7-I (CPR involving spoiled units with salvage value; using FIFO method)

Ditolux Corp. uses a FIFO process costing system to account for production in two
departments, namely: Cracking Department and Refining Department. Units are inspected
at the end of the production process in the Refining Department. Good units are transferred
to finished goods inventory and spoiled units are transferred to a separate inventory
account. Spoiled units are inventoried at their salvage value of P8 per unit, and the
unrecoverable cost of spoilage resulting from an internal production failure is charged to the
appropriate account. Data related to September operations in the Refining Department
follow:

Units in beginning inventory (60% materials, 30% labor & overhead)................ 2,800
Units received from Cracking Department this month....................................... 8,400
Units transferred to the finished goods inventory this month............................. 7,600
Units spoiled this month ………………………………………………………………………………………… ?
Units in ending inventory (100% materials, 50% labor & overhead)................... 2,500

Beginning Added
Costs Charged to the Refining Department: Inventory This Month
Costs Transferred-In........................................................... P17,889 P68,040
Materials........................................................................... 2,733 11,900
Labor................................................................................ 7,278 30,063
Factory overhead............................................................... 12,350 51,016

REQUIRED: Prepare the September, 2023 Cost of Production Report for the Refining
Department.

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