UNIT 12: PROCESS COSTING

EQUIVALENT PRODUCTION
Problem 1

In process, beginning (60% incomplete) 6,000 units

Received from preceding department 44,000 units
Completed and transferred 40,000 units
In process, end (30% complete) 5,000 units
Materials in this department are added at the end of the process after quality control inspection.

In process, beginning (30% complete) 10,000 units

Received from preceding department 30,000 units
Completed and transferred 32,000 units
In process, end (40% complete) 6,000 units
Lost units (normal-discovered at the 2,000 units
beginning)
Materials in this department are added 100% at the beginning.

In process, beginning (50% complete) 5,000 units

Received from preceding department 25,000 units
Completed and transferred 22,000 units
In process, end (80% complete) 5,000 units
Lost units (abnormal-discovered when 3,000 units
60% completed)
Materials in this department are added 100% at the beginning of the process.

Required: Equivalent production for materials and conversation costs using (a) Weighted Average method and (b) FIFO
method.

COST OF PRODUCTION REPORT: FIFO COSTING

Problem 2
Beyond Borders Corporation operates two departments in its operations, namely Department I and Department II.
Inventories, cost, and production data for the month of March, 2022 are as follows:

QUANTITY: Dept I Dept II

Units in-process, 6,000 5,000
beginning
Stage of completion 2/3 3/5
Started in process 44,000 -
Units transferred out 40,000 37,000
Units in-process, ending ? ?
Stage of completion 3/5 7/8

COST:
In process, beginning P5,200 P10,000
Added this month:
Materials 19,800 34,799
Labor 14,200 27,470
Overhead 2,600 18,450

Conversion costs are applied evenly in all the departments. Materials are applied as follows:
Dept I – all at the START of the process; DEPT II – 30% at the START, 40% at MID-POINT, and 30% at the END of the
process.

Required: Prepare a Cost of Production Report for Dept I and Dept II for March of 2022.
 COST OF PRODUCTION REPORT: AVERAGE COSTING
Problem 3
Doha Q, Incorporated has the following production data for the month of April 2022.

QUALITY SCHEDULE Dept I Dept II

In process, beginning –
2/3 complete: 15,000 1/3 complete: 9,000
Transferred to next
department 30,000 ?
In process, ending 2/5
complete: 5,000 7/8 complete: 8,000

COST ANALYSIS
Units in process, beginning:
Cost from preceding
department - P9,000
Costs from this department:
Materials P8,145 P3,996
Labor 3,315 1,998
Overhead 1,050 1,332

Costs added this month:

Materials P10,860 P30,636
Labor 7,309 23,310
Overhead 2,534 15,540

In Dept I, all materials are added at the START of the process, while labor and overhead are applied evenly throughout
the process. In Dept II, 50% of materials are added at the START of the process and the balance is added when the
process is ¾ completed. Conversion costs are applied uniformly to the process.

Required: Prepare a Cost of Production Report for Dept I and Dept II for April, 2022.

Problem 4
Candace Company manufactures a product through a continuous process in two departments. Materials in both
departments are added at beginning. Materials Inventory as of January 1, 2022 amounted to P20,000. Materials purchased
for the month is P180,000. Materials issued to Department 1 amounted to P100,000 and to Department 2 – P60,000.
Indirect materials amounted to P10,000. Payroll for the period amounted to P250,000 consisting of direct labor of P138,000
for Department 1 and P97,500 for Department 2, the balance representing indirect labor. Factory overhead is applied at
the rate of 80% of DLC. Other Factory overhead costs amounted to P167,500. The production data (units) are shown
below

Department 1 Department 2
Units started 50,000
Units completed and
transferred 40,000 35,000
Units in process, end 10,000 5,000
Percentage of
completion 60% 80%

Finished goods inventory at the beginning consisted of 5,000 units at a total cost of P65,000. Units sold – 25,000 units at
P40.00 per unit.

Required:
1. Cost of production report for January, 2022
2. All journal entries
3. Statement of cost of goods sold
COST OF PRODUCTION REPORT (WITH NORMAL LOST UNITS)
FIFO COSTING AND AVERAGE COSTING
Problem 5
Mesmerized, Inc. uses three departments to produce a hair tonic. The Finishing department is the third and last step before
the product is transferred to finished goods storage.

All materials needed to give the hair tonic its final composition are added at the beginning of the process in the Finishing
department. Quality control inspection is done at the end of the process in this department, and lost units, if any, are
discovered only at this point.
The following data for the Finishing department for May, 2022 have been made available.
Quantity Data:
In process, May 1 (labor and 10,000 units
overhead, ¾ complete)
Received from the preceding
department 40,000 units
Finished and transferred to
storage 35,000 units
In process, May 31 (labor and
overhead, ½ complete) 10,000 units

Cost Data:
Inventory work-in-process –
May 1:
Cost from preceding
department P 38,000
Cost from this
department:
Materials 21,500
Labor 39,000
Overhead 42,000
Total Inventory work-in-
process, May 1 P 140,500
Received from the preceding
department during May 140,000
Costs added in this
department this month:
Materials P 70,000
Labor 162,500
Overhead 130,000 362,500
Total cost to be accounted for P 643,000

Required: Prepare a Cost of Production Report for May, 2022 using (a) FIFO Costing, and (b) AVERAGE Costing.

COST OF PRODUCTION REPORT WITH NORMAL AND ABNORMAL LOST UNITS

FIFO COSTING
Problem 6
Hispanic Manufacturers, Inc. uses process costing in its manufacturing operations. In Dept 2, conversion costs are incurred
uniformly throughout the process. Materials are added following inspection, which occurs at the 90% stage of completion.
Normal spoilage is expected to be 5% of good output.
The following information relates to Department 2 for June, 2022.
Units Pesos
Received from Department 1 12,000 P84,000
Transferred to finished product 9,000
Ending inventory (70%
complete) 2,000

Costs incurred during the current month:

Materials 18,000
Labor and overhead 45,200

Required: Prepare a Cost of Production Report for Dept 2 for June, 2022.