UNIVERSITY OF SANTO TOMASALFREDO M. VELAYO COLLEGE OF ACCOUNTANCY SOCIETY OF BUSINESS MANAGERIAL ACCOUNTANTS A.Y. 2016-2017 COST ACCOUNTING (PROCESS COSTING) PROBLEM 1 Compute the equivalent units of production of conversion cost for each of the following independent cases A. In process, end (5/8 incomplete) 42,400 units In process, beg (1/3 to be completed) 29,250 units (Units started in process is 175% of the work in process at the end) 1. EUP using FIFO B. In process, beg (3/5 additional work to be done) 10, 125 units Finished and Transferred units 15,570 units (Of the units started in process, ½ represent work in process at the end which were 20% completed during the current period) 2. EUP using Average PROBLEM 2 IDOL Inc. adds materials at the beginning of the process in department USB conversion costs were 70% complete as to the 9,500 work-in-process units on September 1 and 40% incomplete as to the 7,000 work-in-process units on September 30. During September, 12,000 units were completed and transferred to the next department. An analysis of the cost relating to work-in-process on September 1 and to production activity for September is as follows: (2 decimal places) Costs Materials Conversion Work-In-process, September 1 P10,000 P7,500 Costs Incurred during September P42,750 P52,525 3. The total cost per equivalent unit for September under FIFO 4. The total cost per equivalent unit for September under average PROBLEM 3 The following information is available for Updharmadown Corporation for the current month: Forming began the month with 500 wreaths in process that were 100 percent complete as to material and 40 percent complete as to conversion. What are the equivalent units of production for the conversion cost? 9.200 wreaths that were still in process that were 100 percent complete as to material and 50% complete as to conversion. 5.350 units Ending WIP (30% to be done) ? Transferred out 108.000 units Abnormal spoilage 1. At month end. 8.675 Current Costs: Material P170. The company expects spoilage .000 Conversion P525. Total costs of transferred out units 10. 6.125 units Ending Work In Process (20% incomplete) 23.000 units Beginning Work In Process (65% to be done) 35.250 units Total spoilage 3. Forming had 1.900 units were completed. Total costs of units transferred out 6.250 Conversion P60.625 Conversion P265.915 All materials are added at the start of production and inspection point is at the end of the process.700 Current Costs: Material P180. Using the more accurate method representing the physical flow of units.Started this month 120. The amount of work in process end 7.000 units Total Spoilage 14. Cost of abnormal loss units PROBLEM 4 Housemartins Corporation has the following information for the current month Units started 175.335 All materials are added at the start of the production process. Using the method that does not commingle the beginning and the current period production activity.750 units Beginning Work In Process Costs: Material P15.875 units Spoilage within tolerance level 6. end PROBLEM 5 The Fantastic Decorations Corporation makes wreaths in two departments: Forming and Decorating.500 wreaths were started and 4. Housemartins Corporation inspects goods at 100 percent completion as to conversion.375 units Transferred out ? units Beginning Work In Process Costs: Material P46. The amount of work-in-process.600 Conversion P20.000 units Beginning WIP (3/5 incomplete) 11. During the month. 6. 10 4.300 Current Costs: Material P14. the ribbons are added to the units. 52 696 11. 192 675 9. 5 200 .210 Current Period: Transferred In ? Ribbon P26. 645 690 6.820 11. 57 450 2. 88 627. 4. Decorating uses the FIFO method of process costing and costs associated with Decorating are: Beginning WIP inventory Transferred In 1. 7 897.980 Conversion P95.125 The Decorating Department had 600 wreaths in process at the beginning of the month that is 90% incomplete as to conversion.820 Conversion P20. Assume Forming uses the weighted average method of process costing. After this. The amount of work in process.49 5. end in the Forming Department 13. What are the equivalent units of production for conversion cost in Decorating Department? Answer Key 1. What are the equivalent units of production for materials in Decorating Department? 15.of no more than 10% of the units started in process. 1 625 14. Spoilage of no more than 3% of the units started and completed in considered to be normal. 469 606 10. 5 460 13. Cost of abnormal loss units in Forming Department 14. 31 850 12. Inspection is done when the wreaths are 80% complete.690 Conversion P2. The department had 800 units in ending Work In Process that were 85% complete as to conversion. 16 875 3.100 units were completed during the month. 4 900 15.50 7.170 Ribbon - Conversion 6.50 8. Costs in the Forming Department are as follows: Beginning Work In Process Costs: Material P1. Total costs of units transferred out to Decorating Department 12. 697 The Decorating Department had 600 wreaths in process at the beginning of the month that is 90 percent incomplete as to conversion. 2016-2017 COST ACCOUNTING (JOINT AND BY PRODUCT) Problem Solving A.192 Conversion 45. Inspection is done when the wreaths are 60 percent complete. UNIVERSITY OF SANTO TOMAS ALFREDO M. The department had 300 units in ending Work in Process that were 75 percent complete as to conversion. How much is the total normal loss shouldered by the units started and completed? 4. 4. What is the total cost to be charged to profit or loss for the month? . Assume Forming uses the weighted average method of process costing.500 wreaths were started and 4. Other materials are assumed to be added evenly throughout the decoration process. 6. Decorating uses the FIFO method of process costing.Y. How much is Forming department’s work in process inventory? 2.025 Ribbon 27. and the costs associated with Decorating are: Beginning WIP Inventory: Transferred In P3. VELAYO COLLEGE OF ACCOUNTANCY SOCIETY OF BUSINESS MANAGERIAL ACCOUNTANTS A. Forming had 1. Costs in the Forming Department are as follows: Beginning Work in Process Costs: Material P3. The company expects spoilage of no more than 10 percent of the units started in process. Spoilage of no more than 15 percent of the units started and completed is considered to be normal.900 units were completed. Ribbons are added at 65 percent completion. The Fantastic Decorations Corporation makes wreaths in two departments: Forming and Decorating.350 Current Costs: Material P5. During the month.175 Conversion 6. At month end.057 1. What is the amount of the transferred out cost of the Forming department? 3.200 wreaths that were still in process that were 100 percent complete as to material and 50 percent complete as to conversion. How much is the cost of goods manufactured for the month? 5. Forming began the month with 500 wreaths in process that were 100 percent complete as to material and 40 percent complete as to conversion.144 Other Materials 768 Ribbon - Conversion 823 Current Period: Transferred In ? Other Materials P64.233 Conversion 15.100 units were completed during the month. 9.203 N/A Chemical Y N/A P118. Assuming the company has no balance in its finished goods inventory beginning account and it has sold 61. Product yield and sales value on a per-unit basis are as follows: .000.260 29.910 287. Stockton uses the weighted average cost accumulation system. The sum of the cost per EUP in the Mixing department.000.B. Other materials cost contained in the ending work in process inventory of Mixing department.499 Cost in beginning inventory Other materials P9. Posts used as support braces (mine support braces for exterior fences around ranch properties) These products are the result of a joint process that involves removing bark from the logs.900 units. or maple) and the size (diameter) of the log.000 Percent complete as to conversion 40% 65% Gallons on hand at the beginning of the month 8. Sheldon Inc. Data for February are as follows: Mixing Department Boiling Department Gallons transferred to Boiling Department 75.825 N/A Chemical X 100.547 N/A Chemical Y N/A P672. Decorative pieces (fireplace mantels and beams for cathedral ceilings) c.626 Prior department costs N/A 65. oak. 45 percent and 90 percent completion respectively. what is the balance of cost of goods sold? C.000 8.741 Other materials Chemical X and Chemical Y are added at the beginning.000 Gallons on hand at the end of the month 9. Compute for the following: 6. purchases logs from independent timber contractors and processes them into three types of lumber products as follows: a. cutting the logs into a workable size and then cutting the individual products from the logs. walnut. 8. Total joint costs amounted to P5.000 15.000 Percent incomplete as to conversion 50% 85% Costs incurred during February Other materials P69. depending upon the type of wood (pine. 7.975 N/A Chemical X 23. Stockton Company makes a chemical spray that goes through two processes. Total cost of the ending inventory units for February in the Boiling department. Studs for residential construction (walls and ceilings) b.000 Gallons transferred to finished goods 68.000 Conversion cost 60.214 Conversion cost 210. 000 35 F 25. By how much will the profit decrease if the company chooses to process all the products further? E. Which product/s must be sold at split off point? 14.750 20 3 The studs and posts require no further processing whereas the decorative pieces must be planed and further sized after emerging from the sawmill. A pharmaceutical company processes a material which is to yield three outputs. Without this planning and sizing process.000 264. there is still an active market for the unfinished decorative pieces where the sales and prices averages P50 per unit.000 studs.000 231. Product D.000 55 120.000 Selling price per kilo P17.378.000 30 150.900 100 10 Posts 48.000 posts are unsold at year end and the balance in finished goods inventory beginning is zero. This additional processing costs P1. Product Gallons Selling price at Further processing Final selling produced split off point processing cost price D 22.000 P58 E 23.40 . how much is the cost of goods sold? D. Quartz Company manufactures three different products from using a single raw material. The cost that the company will incur to be able to sell the product will be the same regardless of their decision ti sell as is or process further.000 decorative pieces and 12. Product Monthly output Fully processed sales price Cost to sell Studs P243.750 P8 P2 Decorative pieces 68. The company uses the relative sales value method of allocating joint cost and plans to maximize their profit for the period.40 12.000 59 13. How much is the cost per unit of studs? 11. What is the total joint costs allocated to posts? 12. E.000 P40 P180. and F. Assume that 35.05 2.75 3. Pertinent information is presented below: Amethyst Sapphire Turquoise Kilos of output 165.25 9. 10.000 per month. The company has purchased P850.45 Cost to sell per kilo 2. 5.000 worth of raw materials and incurred conversion costs of P350.000. 000 Variable factory overhead 123.000 Fixed factory overhead 297. Total internal failure cost.000 Litigation 50.000 Quality audits 134.000 Continuing supplier verification 250.000 101. Assume the use of physical measure of allocating joint cost: 15.750 173. There was no finished goods inventory beginning. Separate Processing Cost Total Cost Amethyst Sapphire Turquoise Materials P1. What is the net income of Quartz for the year? 17. What is the gross profit for Quartz Company? 16.000 1. 24.000 Packaging inspection 50. How much is the net income of Quartz for the year? F.000 Quality training 275.800 Lost profit from selling defective units 69.000 P340.500.000 Marketing research 125. Maxwell Company has presented you with the following information: Defective units 1. How much of the total joint cost was allocated to Sapphire? 19.250 . How much is the cost per unit of Turquoise? 20.000 All the units produced were also sold during the year except 46.000 Warranty costs 35.600 Discounts due to defects 45.500 Units reworked 700 Customer claims processed 845 Discounts due to defects P12.250 198.000 Direct Labor P250. 23.000 Rework costs 37. Total appraisal cost.000 600.000 P690.000 495.280. Total external failure cost. G.800 Compute the following: 22. The following information relating to the cost of quality if Hansen Company is presented below: Recruiting P350. 25. What is the amount to be reported as operating expense for the year? 21.200 units of sapphire.000 202. Total prevention cost. What is the balance of finished goods inventory end? Assume the use of relative sales value method of allocating joint cost (no rounding off for the percentage to be used for allocation): 18. 05 7. 107 600 25. 130 600 26. 884 000 23. 6. 6 20. 1 650 990 21. 392 211 19. 2 565 671 22. 248 050 18. 25 235 3. 765 306 12. How much is the lost from profit from selling defective units? 27. 3 882 2. 2 592 230 17. Warranty expense 56. How much is the total cost of noncompliance? Answer Key 1. 6. 121 775 . Product E and F 14.28 11. 1 359 324 10. 300 000 24. 144 075 5. 8 550 8. 11 200 27. 11 922 6. 133 530 9.800 Profit per unit of regular sales 36 Profit per unit of defective units 22 Cost per customer claim processed 45 Rework cost per unit 5 26. 55 000 15. 8 240 4. 5 673 605 13. 4 243 220 16. Actual Factory Overhead 9.UF 4. UNIVERSITY OF SANTO TOMAS ALFREDO M. 2016-2017 COST ACCOUNTING (STANDARD COSTING) Problem 1 Compute for the missing items: nos.F Volume Variance P 500 .00 (40% is fixed) Efficiency Variance P 200 . Actual Factory Overhead 7. Actual Factory Overhead 2.UF 1. Actual hours worked 12.400 . Fixed Spending Variance 11.500 Standard Hours Allowed 1. 1-12 are based on the foregoing: CASE I (2-Way) Standard Factory Overhead P 7.Y. Budgeted Overhead based on standard hours 3. VELAYO COLLEGE OF ACCOUNTANCY SOCIETY OF BUSINESS MANAGERIAL ACCOUNTANTS A. Total Factory Overhead cost variance . Volume Variance 10.000 hours 8.UF Variable Efficiency Variance P 200 .F Total Factory Overhead Variance P 500 .800 Spending Variance P 1000 .500 Controllable Variance P 500 .UF Actual Fixed Overhead P 6. Total Factory OH Variance CASE III (4-Way) Standard Factory Overhead P 10.F Variable Spending Variance P 1.800 hours Normal Capacity 2. Volume Variance CASE II (3-Way) Standard Factory Overhead P 9. Budgeted OH based on Standard Hours 5. Budgeted OH based on Actual Hours 6. 21 per lb Materials used to manufacture 10. The following standards have been set for each blood rest performed. Calculate the actual hours worked rounded to the nearest hour.000 units 60.00 per pound.P1. 22.000 units of a product. 23. Actual direct labor hours 39. 17. Actual material cost is P2.000 lbs.Problem 2 The standard cost of one unit of a manufactured product of JUGGERNAUT Company follows: Materials .4 hours @ P7. .500 Standard fixed OH .P4. Fixed overhead volume variance Problem 4 Selected data for SENTINEL COMPANY is as follows: Standard wage rate .148. Material purchase price variance 14.00 per hour Actual date for the month of October: Materials purchased 100. Variable efficiency variance 19.80/hr 13. The material price variance is P720.5 hours to produce a finished unit.085.P400 FAV Actual wage rate . How much is the total labor variance? Problem 5 During August 2012. Variable overhead spending variance 18.P475. The direct material standard requires 4 pounds of material per unit of product at a standard price of P2. @ P0.000 Based on the standard.20 per pound.000 @ P6.000 Actual fixed OH .00/hr Units manufactured . Labor efficiency variance 15.000 Total Budgeted factory OH .P632.155.75 Standard hours allowed for actual production .actual 60.20 Labor .P4. Material quantity variance Problem 3 The PSYLOCKE Company manufactures one product and provides you with the follwingin formation for the year 2012: Normal direct labor hours . Assume the quantity purchased and used is the same.500 21.000 Actual direct labor hours .000 Actual Variable OH .000 lbs. Problem 6 The BLACKHEART HOSPITAL performs blood tests in its laboratory.5 pounds @ P0.7. WAR MACHINE Company produced 1. Labor rate variance 16. Fixed overhead spending variance 20.P5. Compute for the material usage variance.00 Labor efficiency variance . it takes 2. The material quantity variance 26. 10 300 5. there were plates on hand.P2. Rate or hours Direct Materials 2 plates P2. 12 500 UF 20. 3. On October 1. Price or Quantity Std. 2 000 UF 17.00 plated were used for blood tests C.2 hours P7. 0 27.500 Compute the following: 24. The labor efficiency variance 28. The variable overhead spending variance Answer Key 1. after a plate is used for a blood test it is discarded. 20 000 UF 21. 800 F 24. Variable overhead is assigned to blood tests on the basis of direct labor hours. The material price variance 25. 8 000 2.540 B. The following events occurred during October: A. 120 UF . 3.00 per hour Variable overhead 0.500 blood tests. 8 500 3. 9 500 7. 300 F 8. 7 000 F 15. Item Std. 340 actual direct labor hours were worked at a cost of P5. 1 500 F 11. 7 800 F 16. 1 000 UF 14. 7 420 22. 600 UF 28. 2 255 F 23. 18 500 9. 31 000 UF 18.100 D.00 per hours During October. 1 000 UF 4.600 plates were purchased at a cost of P9.2 hours P15. the laboratory performed 1. 1 767 12. 6 000 F 19. 10 500 6. Actual Variable overhead . 800 UF 10. 550 UF 26.75 per plate Direct Labor 0. The labor rate variance 27. 500 UF 13. 360 F 25.