MADAWALABU UNIVERSITY

SCHOOL OF BUSINESS AND ECONOMICS

ACCOUNTING AND FINANCE MODULE TEAM
Cost and management accounting I Assignment
Q1. How are job order and process costing similar? How do they differ?
Q2. Why are equivalent units of production used as an output measure in process costing? In
your answer, be sure to address the problems created by partially completed inventories.
Q3. What creates the difference between weighted average and FIFO equivalent units of
production? Which EUP calculation more accurately portrays the actual flow of units through a
manufacturing process and why?
Q4. Why is it necessary to calculate separate equivalent units of production for each cost
component of a product? Are there times when separate EUP schedules are not necessary and, if
so, why?
Q5. Hogle Company is a manufacturing firm that uses job-order costing. On January 1, the
beginning of its fiscal year, the company’s inventory balances were as follows:
Raw materials . . . . . . . . . . . . . . . . . . . . . . $20,000
Work in process . . . . . . . . . . . . . . . . . . . . 15,000
Finished goods . . . . . . . . . . . . . . . . . . . . . 30,000
The company applies overhead cost to jobs on the basis of machine-hours worked. For the
current year, the company estimated that it would work 75,000 machine-hours and incur
$450,000 in manufacturing overhead cost. The following transactions were recorded for the year:
a) Raw materials were purchased on account, $410,000.
b) Raw materials were requisitioned for use in production, $380,000 ($360,000 direct
materials and $20,000 indirect materials).
c) The following costs were incurred for employee services: direct labor, $75,000; indirect
labor, $110,000; sales commissions, $90,000; and administrative salaries, $200,000.
d) Sales travel costs were incurred, $17,000.
e) Utility costs were incurred in the factory, $43,000.
f) Advertising costs were incurred, $180,000.
g) Depreciation was recorded for the year, $350,000 (80% relates to factory operations, and
20% relates to selling and administrative activities).
h) Insurance expired during the year, $10,000 (70% relates to factory operations, and the
remaining 30% relates to selling and administrative activities).
i) Manufacturing overhead was applied to production. Due to greater than expected
demand for its products, the company worked 80,000 machine hours during the year.
j) Goods costing $900,000 to manufacture according to their job cost sheets were
completed during the year.
k) Goods were sold on account to customers during the year at a total selling price of
$1,500,000. The goods cost $870,000 to manufacture according to their job cost sheets.
Required
1. Prepare journal entries to record the preceding transactions.
2. Post the entries in (1) above to T-accounts (do not forget to enter the opening balances in
the inventory accounts).

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 3. Is manufacturing overhead under applied or over applied for the year? Prepare a journal
entry to close any balance in the Manufacturing Overhead account to Cost of Goods
Sold. Do not allocate the balance between ending inventories and Cost of Goods Sold.
4. Prepare an income statement for the year and a statement of cost of goods manufactured.
Q6. Techno Co., produces a special kind of tool that is widely used by construction. The tool is
produced in two production departments: Bending and Drilling. Raw materials are introduced at
various points in the Bending Department.
The following incomplete Work in Process account has been provided for the Bending
Department for May:

Work in Process —Bending Department

May 1 balance 26,302
May costs added:
Raw materials (200,000 units) 333,854
Direct labor 77,244
Overhead 155,200
May 31 balance?
Completed and transferred to Drilling ( ____? units) ____ ?
The May 1 work in process inventory in the Bending Department consists of the following
elements: raw materials, $16,346; direct labor, $3,556; and overhead, $6,400. Costs incurred
during May in the Drilling Department were: materials used, $98,000; direct labor, $53,900; and
overhead cost applied to production, $55,000.
Required:
1. Prepare journal entries to record the costs incurred in both the Bending Department and
Drilling Department during May. Key your entries to the items (a) through (g) below.
a. Raw materials were issued for use in production.
b. Direct labor costs were incurred.
c. Manufacturing overhead costs for the entire factories were incurred, $245,000. (Credit
Accounts Payable.)
d. Manufacturing overhead cost was applied to production using a predetermined
overhead rate.
e. Units that were complete with respect to processing in the Bending Department were
transferred to the Drilling Department, $551,000.
f. Units that were complete with respect to processing in the Drilling Department were
transferred to Finished Goods, $800,000.
g. Completed units were sold on account, $1,500,000. The Cost of Goods Sold was
$790,000.
2. Post the journal entries from (1) above to T-accounts. The following account balances
existed at the beginning of May. (The beginning balance in the Bending Department’s
Work in Process account is given above.)
Raw Materials............................................... $585,000
Work in Process—Drilling Department........ $86,000
Finished Goods ............................................. $25,000
After posting the entries to the T-accounts, find the ending balances in the inventory
accounts and the manufacturing overhead accounts

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Q7. Nihon, Inc., is a manufacturer of digital cameras. It has two departments: assembly and
testing. In January 2012, the company incurred $750,000 on direct materials and $798,000 on
conversion costs, for a total manufacturing cost of $1,548,000.
Required:
1. Assume there was no beginning inventory of any kind on January 1, 2012. During January,
10,000 cameras were placed into production and all 10,000 were fully completed at the end of
the month. What is the unit cost of an assembled camera in January?
2. Assume that during February 10,000 cameras are placed into production. Further assume the
same total assembly costs for January are also incurred in February, but only 9,000 cameras are
fully completed at the end of the month. All direct materials have been added to the remaining
1,000 cameras. However, on average, these remaining 1,000 cameras are only 50% complete
as to conversion costs. (a) What are the equivalent units for direct materials and conversion
costs and their respective costs per equivalent unit for February? (b) What is the unit cost of an
assembled camera in February 2012?
3. Explain the difference in your answers to requirements 1 and 2.
Q8. Roary Chemicals has a mixing department and a refining department. Its process-costing
system in the mixing department has two direct materials cost categories (chemical P and
chemical Q) and one conversion costs pool. The following data pertain to the mixing
department for July 2012:
Units:
Work in process, July 1 0
Units started 50,000
Completed and transferred to refining department 35,000
Costs:
Chemical P $250,000
Chemical Q 70,000
Conversion costs 135,000
Chemical P is introduced at the start of operations in the mixing department, and chemical Q is
added when the product is three-fourths completed in the mixing department. Conversion costs
are added evenly during the process. The ending work in process in the mixing department is
two-thirds complete.
Required:
1. Compute the equivalent units in the mixing department for July 2012 for each cost category.
2. Compute (a) the cost of goods completed and transferred to the refining department during
July and (b) the cost of work in process as of July 31, 2012.
Q9. Honeybutter, Inc., manufactures a product that goes through two departments prior to
completion.
The following information is available about work in the first department, the Mixing
Department, during June.
Percent Completed
Units Materials Conversion
Work in process, beginning ..................... 50,000 60% 30%
Started into production ............................ 470,000
Completed and transferred out ................ 450,000
Work in process, ending.......................... 60,000 70% 20%

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Cost in the beginning work in process inventory and cost added during June were as follows for
the Mixing Department:
Materials Conversion
Work in process, beginning ..................... $24,500 $9,500
Cost added during June ........................... $377,600 $274,200
The company uses the FIFO method to compute unit product costs.
Required:
1. Determine the equivalent units for June for the Mixing Department.
2. Compute the costs per equivalent unit for June for the Mixing Department.
3. Determine the total cost of ending work in process inventory and the total cost of units
transferred to the next department in June.
4. Prepare a report that reconciles the total costs assigned to the ending work in process
inventory and to the units transferred out with the costs in beginning inventory and costs added
during the period.
Q10. McArthur Corporation makes toy metal soldiers in a one-department production process.
All metal is added at the beginning of the process. Paint for the figures and the plastic bags for
packaging are considered indirect materials. The following information is available relative to
September 2000 production activities:
Beginning inventory: 75,000 figures (60% complete as to labor; 85% complete as to overhead)
Started into production: metal for 250,000 figures, which were cast during the month
Ending inventory: 30,000 figures (70% complete as to labor; 90% complete as to overhead)
a. Compute the EUP for direct material, direct labor, and overhead using weighted average
process costing.
b. Compute the EUP for direct material, direct labor, and overhead using FIFO process costing.
c. Reconcile the calculations in parts (a) and (b).

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