CHAPTER 17
PROCESS COSTING
17-1 Industries using process costing in their manufacturing area include chemical processing,
oil refining, pharmaceuticals, plastics, brick and tile manufacturing, semiconductor chips,
beverages, and breakfast cereals.
17-2 Process costing systems separate costs into cost categories according to the timing of
when costs are introduced into the process. Often, only two cost classifications, direct materials
and conversion costs, are necessary. Direct materials are frequently added at one point in time,
often the start or the end of the process, and all conversion costs are added at about the same
time, but in a pattern different from direct materials costs.
17-3 Equivalent units is a derived amount of output units that takes the quantity of each input
(factor of production) in units completed or in incomplete units in work in process, and converts
the quantity of input into the amount of completed output units that could be made with that
quantity of input. Each equivalent unit is comprised of the physical quantities of direct materials
or conversion costs inputs necessary to produce output of one fully completed unit. Equivalent
unit measures are necessary since all physical units are not completed to the same extent at the
same time.
17-4 The accuracy of the estimates of completion depends on the care and skill of the
estimator and the nature of the process. Semiconductor chips may differ substantially in the
finishing necessary to obtain a final product. The amount of work necessary to finish a product
may not always be easy to ascertain in advance.
17-5 The five key steps in process costing follow:
Step 1: Summarize the flow of physical units of output.
Step 2: Compute output in terms of equivalent units.
Step 3: Compute cost per equivalent unit.
Step 4: Summarize total costs to account for.
Step 5: Assign total costs to units completed and to units in ending work in process.
17-6
Three inventory methods associated with process costing are:
 Weighted average.
 First-in, first-out.
 Standard costing.
17-7 The weighted-average process-costing method calculates the equivalent-unit cost of all
the work done to date (regardless of the accounting period in which it was done), assigns this
cost to equivalent units completed and transferred out of the process, and to equivalent units in
ending work-in-process inventory.
17-1
17-8 FIFO computations are distinctive because they assign the cost of the previous
accounting period’s equivalent units in beginning work-in-process inventory to the first units
completed and transferred out of the process and assigns the cost of equivalent units worked on
during the current period first to complete beginning inventory, next to start and complete new
units, and finally to units in ending work-in-process inventory. In contrast, the weighted-average
method costs units completed and transferred out and in ending work in process at the same
average cost.
17-9 FIFO should be called a modified or departmental FIFO method because the goods
transferred in during a given period usually bear a single average unit cost (rather than a distinct
FIFO cost for each unit transferred in) as a matter of convenience.
17-10 A major advantage of FIFO is that managers can judge the performance in the current
period independently from the performance in the preceding period.
17-11 The journal entries in process costing are basically similar to those made in job-costing
systems. The main difference is that, in process costing, there is often more than one work-inprocess account––one for each process.
17-12 Standard-cost procedures are particularly appropriate to process-costing systems where
there are various combinations of materials and operations used to make a wide variety of similar
products as in the textiles, paints, and ceramics industries. Standard-cost procedures also avoid
the intricacies involved in detailed tracking with weighted-average or FIFO methods when there
are frequent price variations over time.
17-13 There are two reasons why the accountant should distinguish between transferred-in
costs and additional direct materials costs for a particular department:
(a) All direct materials may not be added at the beginning of the department process.
(b) The control methods and responsibilities may be different for transferred-in items and
materials added in the department.
17-14 No. Transferred-in costs or previous department costs are costs incurred in a previous
department that have been charged to a subsequent department. These costs may be costs
incurred in that previous department during this accounting period or a preceding accounting
period.
17-15 Materials are only one cost item. Other items (often included in a conversion costs pool)
include labor, energy, and maintenance. If the costs of these items vary over time, this variability
can cause a difference in cost of goods sold and inventory amounts when the weighted-average
or FIFO methods are used.
A second factor is the amount of inventory on hand at the beginning or end of an
accounting period. The smaller the amount of production held in beginning or ending inventory
relative to the total number of units transferred out, the smaller the effect on operating income,
cost of goods sold, or inventory amounts from the use of weighted-average or FIFO methods.
17-2
17-16 (25 min.) Equivalent units, zero beginning inventory.
1.
Direct materials cost per unit ($720,000 ÷ 10,000)
Conversion cost per unit ($760,000 ÷ 10,000)
Assembly Department cost per unit
$ 72
76
$148
2a. Solution Exhibit 17-16A calculates the equivalent units of direct materials and conversion
costs in the Assembly Department of International Electronics in February 2007.
Solution Exhibit 17-16B computes equivalent unit costs.
2b.
Direct materials cost per unit
Conversion cost per unit
Assembly Department cost per unit
$ 72
80
$152
3.
The difference in the Assembly Department cost per unit calculated in requirements 1 and
2 arises because the costs incurred in January and February are the same but fewer equivalent
units of work are done in February relative to January. In January, all 10,000 units introduced are
fully completed resulting in 10,000 equivalent units of work done with respect to direct materials
and conversion costs. In February, of the 10,000 units introduced, 10,000 equivalent units of
work is done with respect to direct materials but only 9,500 equivalent units of work is done with
respect to conversion costs. The Assembly Department cost per unit is, therefore, higher.
SOLUTION EXHIBIT 17-16A
Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;
Assembly Department of International Electronics for February 2007.
Flow of Production
Work in process, beginning (given)
Started during current period (given)
To account for
Completed and transferred out
during current period
Work in process, ending* (given)
1,000  100%; 1,000  50%
Accounted for
Work done in current period only
(Step 1)
Physical
Units
0
10,000
10,000
9,000
1,000
(Step 2)
Equivalent Units
Direct
Conversion
Materials
Costs
9,000
9,000
1,000
500
10,000
9,500
10,000
*Degree of completion in this department: direct materials, 100%; conversion costs, 50%.
17-3
SOLUTION EXHIBIT 17-16B
Compute Cost per Equivalent Unit,
Assembly Department of International Electronics for February 2007.
(Step 3) Costs added during February
Divide by equivalent units of work done
in current period (Solution Exhibit 17-l6A)
Cost per equivalent unit
Total
Production
Costs
$1,480,000
Direct
Materials
$720,000
Conversion
Costs
$760,000
 10,000
$
72

$
9,500
80
17-17 (20 min.) Journal entries (continuation of 17-16).
1.
2.
3.
Work in Process––Assembly
Accounts Payable
To record $720,000 of direct materials
purchased and used in production during
February 2007
Work in Process––Assembly
Various accounts
To record $760,000 of conversion costs
for February 2007; examples include energy,
manufacturing supplies, all manufacturing
labor, and plant depreciation
Work in Process––Testing
Work in Process––Assembly
To record 9,000 units completed and
transferred from Assembly to Testing
during February 2007 at
$152  9,000 units = $1,368,000
720,000
720,000
760,000
760,000
1,368,000
1,368,000
Postings to the Work in Process––Assembly account follow.
Work in Process –– Assembly Department
Beginning inventory, Feb. 1
0
3. Transferred out to
1. Direct materials
720,000
Work in Process––Testing
2. Conversion costs
760,000
Ending inventory, Feb. 29
112,000
17-4
1,368,000
17-18 (25 min.) Zero beginning inventory, materials introduced in middle of process.
1.
Solution Exhibit 17-18A shows equivalent units of work done in the current period of
Chemical P, 50,000; Chemical Q, 35,000; Conversion costs, 45,000.
2.
Solution Exhibit 17-18B calculates cost per equivalent unit of work done in the current
period for Chemical P, Chemical Q, and Conversion costs, summarizes the total Mixing
Department costs for July 2007, and assigns these costs to units completed (and transferred out)
and to units in ending work in process.
SOLUTION EXHIBIT 17-18A
Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;
Mixing Department of Vaasa Chemicals for July 2007.
(Step 1)
Flow of Production
Work in process, beginning (given)
Started during current period (given)
To account for
Completed and transferred out
during current period
Work in process, ending* (given)
15,000  100%; 15,000  0%;
15,000  66 2/3%
Accounted for
Work done in current period only
Physical
Units
0
50,000
50,000
35,000
15,000
(Step 2)
Equivalent Units
Chemical P
Chemical Q
Conversion
Costs
35,000
35,000
35,000
15,000
0
10,000
50,000
35,000
45,000
50,000
*Degree of completion in this department: Chemical P, 100%; Chemical Q, 0%; conversion costs, 66 2/3%.
17-5
SOLUTION EXHIBIT 17-18B
Steps 3, 4, and 5: Compute Cost per Equivalent Unit, Summarize Total Costs to Account For,
and Assign Total Costs to Units Completed and to Units in Ending Work in Process;
Mixing Department of Vaasa Chemicals for July 2007.
(Step 3) Costs added during July
Divide by equivalent units of work
done in current period (Solution
Exhibit 17-l8A)
Cost per equivalent unit
(Step 4) Total costs to account for
(Step 5) Assignment of costs:
Completed and transferred out
(35,000 units)
Work in process, ending
(15,000 units)
Total costs accounted for
Total
Production
Costs
$455,000
Chemical P
$250,000
Chemical Q
$70,000
Conversion
Costs
$135,000
 50,000
$
5
35,000
$
2
 45,000
$
3
$455,000
$350,000 (35,000*  $5) + (35,000*  $2) + (35,000*  $3)
105,000 (15,000†  $5) +
$455,000
(0†  $2)
+ (10,000†  $3)
*Equivalent units completed and transferred out from Solution Exhibit 17-18A, Step 2.
†
Equivalent units in work in process, ending from Solution Exhibit 17-18A, Step 2.
17-19 (15 min.) Weighted-average method, equivalent units.
Under the weighted-average method, equivalent units are calculated as the equivalent units of
work done to date. Solution Exhibit 17-19 shows equivalent units of work done to date for the
Satellite Assembly Division of Aerospatiale for direct materials and conversion costs.
SOLUTION EXHIBIT 17-19
Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;
Weighted-Average Method of Process Costing, Satellite Assembly Division of Aerospatiale for
May 2007.
(Step 2)
(Step 1)
Equivalent Units
Physical
Direct Conversion
Flow of Production
Units
Materials
Costs
Work in process beginning (given)
8
Started during current period (given)
50
To account for
58
Completed and transferred out during current period
46
46.0
46.0
Work in process, ending* (12  60%; 12  30%) (given) 12
7.2
3.6
Accounted for
58
____
____
Work done to date
53.2
49.6
*Degree of completion in this department: direct materials, 60%; conversion costs, 30%.
17-6
17-20 (20 min.) Weighted-average method, assigning costs (continuation of 17-19).
Solution Exhibit 17-20 calculates cost per equivalent unit of work done to date in the Satellite
Assembly Division of Aerospatiale, summarizes total costs to account for, and assigns costs to
units completed and to units in ending work-in-process inventory.
SOLUTION EXHIBIT 17-20
Steps 3, 4, and 5: Compute Cost per Equivalent Unit, Summarize Total Costs to Account For,
and Assign Total Costs to Units Completed and to Units in Ending Work in Process;
Weighted-Average Method of Process Costing, Satellite Assembly Division of Aerospatiale for
May 2007.
(Step 3)
(Step 4)
(Step 5)
Total
Production
Costs
$ 5,844,000
46,120,000
Work in process, beginning (given)
Costs added in current period (given)
Costs incurred to date
Divide by equivalent units of work done to date
(Solution Exhibit 17-19)
Cost per equivalent unit of work done to date
Total costs to account for
$51,964,000
Assignment of costs:
Completed and transferred out (46 units)
45,862,000
Work in process, ending (12 units)
6,102,000
Total costs accounted for
$51,964,000
*
†
Direct
Materials
$ 4,933,600
32,200,000
$37,133,600
Conversion
Costs
$ 910,400
13,920,000
$14,830,400

$

$
53.2
698,000
(46* $698,000) + (46*  $299,000)
(7.2† $698,000) + (3.6†  $299,000)
Equivalent units completed and transferred out from Solution Exhibit 17-19, Step 2.
Equivalent units in work in process, ending from Solution Exhibit 17-19, Step 2.
17-7
49.6
299,000
17-21 (15 min.) FIFO method, equivalent units.
Under the FIFO method, equivalent units are calculated as the equivalent units of work done in
the current period only. Solution Exhibit 17-21 shows equivalent units of work done in May
2007 in the Satellite Assembly Division of Aerospatiale for direct materials and conversion
costs.
SOLUTION EXHIBIT 17-21
Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;
FIFO Method of Process Costing, Satellite Assembly Division of Aerospatiale for May 2007.
Flow of Production
Work in process, beginning (given)
Started during current period (given)
To account for
Completed and transferred out during current
period:
From beginning work in process§
8  (100%  90%); 8  (100%  40%)
Started and completed
38  100%, 38  100%
Work in process, ending * (given)
12  60%; 12  30%
Accounted for
Work done in current period only
§
(Step 1)
Physical
Units
8
50
58
(Step 2)
Equivalent Units
Direct
Conversion
Materials
Costs
(work done before current period)
8
0.8
4.8
38.0
38.0
7.2
3.6
46.0
46.4
†
38
12
58
Degree of completion in this department: direct materials, 90%; conversion costs, 40%.
46 physical units completed and transferred out minus 8 physical units completed and transferred out from
beginning work-in-process inventory.
*Degree of completion in this department: direct materials, 60%; conversion costs, 30%.
†
17-8
17-22 (20 min.) FIFO method, assigning costs (continuation of 17-21).
Solution Exhibit 17-22 calculates cost per equivalent unit of work done in May 2007 in the
Satellite Assembly Division of Aerospatiale, summarizes total costs to account for, and assigns
total costs to units completed and to units in ending work-in-process inventory.
SOLUTION EXHIBIT 17-22
Steps 3, 4, and 5: Compute Cost per Equivalent Unit, Summarize Total Costs to Account For,
and Assign Total Costs to Units Completed and to Units in Ending Work in Process;
FIFO Method of Process Costing, Satellite Assembly Division of Aerospatiale for May 2007.
Work in process, beginning
($4,933,600 + $910,400)
(Step 3) Costs added in current period (given)
Divide by equivalent units of work done in
current period (Solution Exhibit 17-21)
Cost per equiv. unit of work done in current period
(Step 4) Total costs to account for
(Step 5) Assignment of costs:
Completed and transferred out (46 units):
Work in process, beginning (8 units)
Costs added to beginning work in process
in current period
Total from beginning inventory
Started and completed (38 units)
Total costs of units completed and
transferred out
Work in process, ending (12 units)
Total costs accounted for
*
Total
Production
Costs
$ 5,844,000
46,120,000
Direct
Conversion
Materials
Costs
(costs of work done before
current period)
$32,200,000
$ 13,920,000

$
46
700,000
17-9
46.4
300,000
$51,964,000
$ 5,844,000
2,000,000 (0.8* $700,000) + (4.8* $300,000)
7,844,000
38,000,000 (38†  $700,000) + (38†  $300,000)
45,844,000
6,120,000 (7.2#  $700,000) + (3.6# $300,000)
$51,964,000
Equivalent units used to complete beginning work in process from Solution Exhibit 17-21, Step 2.
Equivalent units started and completed from Solution Exhibit 17-21, Step 2.
#
Equivalent units in work in process, ending from Solution Exhibit 17-21, Step 2.
†

$
17-23 (25-30 min.) Standard-costing method, assigning costs.
1.
The calculations of equivalent units for direct materials and conversion costs are identical
to the calculations of equivalent units under the FIFO method. Solution Exhibit 17-21 shows the
equivalent unit calculations under standard costing given by the equivalent units of work done in
May 2007 in the Assembly Department.
2.
Solution Exhibit 17-23 summarizes the total costs to account for, and assigns these costs
to units completed and transferred out and to units in ending work in process.
3.
Solution Exhibit 17-23 shows the direct materials and conversion cost variances for
Direct materials
Conversion costs
$230,000 U
$232,000 U
SOLUTION EXHIBIT 17-23
Steps 3, 4, and 5: Compute Cost per Equivalent Unit, Summarize Total Costs to Account For,
and Assign Total Costs to Units Completed and to Units in Ending Work in Process;
Use of Standard Costs in Process Costing, Satellite Assembly Division of Aerospatiale for May
2007.
Total
Production
Costs
Direct
Conversion
Materials
Costs
$ 695,000
$ 295,000
(7.2  $695,000) + (3.2  $295,000)
(46.0  $695,000) + (46.4  $295,000)
(Step 3) Standard cost per equivalent unit (given)
Work in process, beginning (given)
$ 5,948,000
Costs added in current period at standard costs
45,658,000
(Step 4) Total costs to account for
$51,606,000
(Step 5) Assignment of costs at standard costs:
Completed and transferred out (46 units):
Work in process, beginning (8 units)
$ 5,948,000
Costs added to beginning work in process in
(0.8*  $695,000) + (4.8*  $295,000)
current period
1,972,000
Total from beginning inventory
7,920,000
Started and completed (38 units)
37,620,000
(38†  $695,000) + (38†  $295,000)
Total costs of units transferred out
45,540,000
Work in process, ending (12 units)
6,066,000
(7.2#  $695,000) + (3.6#  $295,000)
Total costs accounted for
$51,606,000
Summary of variances for current performance:
Costs added in current period at standard costs (see Step 3
above; 46.0  $695,000; 46.4  $295,000)
$31,970,000
$13,688,000
Actual costs incurred (given)
32,200,000
13,920,000
Variance
$ 230,000 U
$ 232,000 U
*Equivalent units to complete beginning work in process from Solution Exhibit 17-21, Step 2.
†
Equivalent units started and completed from Solution Exhibit 17-21, Step 2.
#
Equivalent units in work in process, ending from Solution Exhibit 17-21, Step 2.
17-10
17-24 (25 min.) Weighted-average method, assigning costs.
1. & 2. Solution Exhibit 17-24 calculates the cost per equivalent unit of work done to date for
direct materials and conversion costs, summarizes total costs to account for, and assigns these
costs to units completed and transferred out and to units in ending work-in-process inventory.
SOLUTION EXHIBIT 17-24
Steps 3, 4, and 5: Compute Cost per Equivalent Unit, Summarize Total Costs to Account For,
and Assign Total Costs to Units Completed and to Units in Ending Work in Process;
Weighted-Average Method of Process Costing, Chatham Company for July 2007.
(Step 3)
(Step 4)
(Step 5)
Work in process, beginning (given)
Costs added in current period (given)
Costs incurred to date
Divide by equivalent units of work done to
date (given)
Cost per equivalent unit of work done to date
Total costs to account for
Assignment of costs:
Completed and transferred out (34,000 units)
Work in process, ending (16,000 units)
Total costs accounted for
*Equivalent units completed and transferred out (given).
†
Equivalent units in work in process, ending (given).
17-11
Total
Production
Costs
$130,000
651,000
Direct
Materials
$ 60,000
280,000
$340,000
Conversion
Costs
$ 70,000
371,000
$441,000
 50,000
$ 6.80
 42,000
$ 10.50
$781,000
$588,200
192,800
$781,000
(34,000*  $6.80) + (34,000*  $10.50)
(16,000†  $6.80) + (8,000†  $10.50)
17-25 (30 min.) FIFO method, assigning costs.
1. & 2. Solution Exhibit 17-25A calculates the equivalent units of work done in the current
period. Solution Exhibit 17-25B calculates the cost per equivalent unit of work done in the
current period for direct materials and conversion costs, summarizes total costs to account for,
and assigns these costs to units completed and transferred out and to units in ending work-inprocess inventory.
SOLUTION EXHIBIT 17-25A
Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;
FIFO Method of Process Costing, Chatham Company for July 2007.
(Step 1)
Physical
Units
Flow of Production
Work in process, beginning (given)
Started during current period (given)
To account for
Completed and transferred out during current period:
From beginning work in process§
10,000  (100%  100%); 10,000  (100% – 70%)
Started and completed
24,000  100%, 24,000  100%
Work in process, ending* (given)
16,000  100%; 16,000  50%
Accounted for
Work done in current period only
§
10,000
40,000
50,000
(Step 2)
Equivalent Units
Direct
Conversion
Materials
Costs
(work done before current period)
10,000
24,000
0
3,000
24,000
24,000
16,000
8,000
40,000
35,000
†
16,000
50,000
Degree of completion in this department: direct materials, 100%; conversion costs, 70%.
34,000 physical units completed and transferred out minus 10,000 physical units completed and transferred out
from beginning work-in-process inventory.
*Degree of completion in this department: direct materials, 100%; conversion costs, 50%.
†
17-12
SOLUTION EXHIBIT 17-25B
Steps 3, 4, and 5: Compute Cost per Equivalent Unit, Summarize Total Costs to Account For, and Assign Total Costs to Units
Completed and to Units in Ending Work in Process;
FIFO Method of Process Costing, Chatham Company for July 2007.
Work in process, beginning ($60,000 + $70,000)
(Step 3) Costs added in current period (given)
Total
Production
Costs
$130,000
651,000
Direct
Materials
(costs of work done before current period)
Divide by equivalent units of work done in
current period (Solution Exhibit 17-25A)
Cost per equivalent unit of work done in current period
$
(Step 4) Total costs to account for
$781,000
(Step 5) Assignment of costs:
Completed and transferred out (34,000 units):
Work in process, beginning (10,000 units)
Cost added to beginning work in process in current period
Total from beginning inventory
Started and completed (24,000 units)
Total costs of units completed and transferred out
Work in process, ending (16,000 units)
Total costs accounted for
$130,000
31,800
161,800
422,400
584,200
196,800
$781,000
*Equivalent units used to complete beginning work in process from Solution Exhibit 17-25A, Step 2.
†
Equivelant units started and completed from Solution Exhibit 17-25A, Step 2.
#
Equivalent units in work in process, ending from Solution Exhibit 17-25A, Step 2.
17-13
Conversion
Costs
$280,000
$371,000
 40,000
 35,000
7
$
10.60
(0*  $7) + (3,000*  $10.60)
(24,000†  $7) + (24,000†  $10.60)
(16,000#  $7) + (8,000#  $10.60)
17-26 (30 min.) Standard-costing method, assigning costs.
1.
The calculations of equivalent units for direct materials and conversion costs are identical
to the calculations of equivalent units under the FIFO method. Solution Exhibit 17-25A shows
the equivalent unit calculations for standard costing given by the equivalent units of work done
in July 2007. Solution Exhibit 17-26 uses the standard costs (direct materials, $6.60; conversion
costs, $10.40) to summarize total costs to account for, and to assign these costs to units
completed and transferred out and to units in ending work-in-process inventory.
2.
Solution Exhibit 17-26 shows the direct materials and conversion costs variances for
Direct materials
Conversion costs
$16,000 U
$7,000 U
SOLUTION EXHIBIT 17-26
Steps 3, 4, and 5: Compute Cost per Equivalent Unit, Summarize Total Costs to Account For,
and Assign Total Costs to Units Completed and to Units in Ending Work in Process;
Use of Standard Costs in Process Costing, Chatham Company for July 2007.
Total
Production
Costs
Direct
Conversion
Materials
Costs
$
6.60
$ 10.40
(10,000  $6.60) + (7,000  $10.40)
(40,000  $6.60) + (35,000  $10.40)
(Step 3) Standard cost per equivalent unit (given)
Work in process, beginning (given)
$138,800
Costs added in current period at standard costs
628,000
(Step 4) Total costs to account for
$766,800
(Step 5) Assignment of costs at standard costs:
Completed and transferred out (34,000 units):
Work in process, beginning (10,000 units)
$138,800
(0*  $6.60) + (3,000*  $10.40)
Costs added to beg. work in process in current period
31,200
Total from beginning inventory
170,000
(24,000† $6.60) + (24,000†  $10.40)
Started and completed (24,000 units)
408,000
Total costs of units transferred out
578,000
Work in process, ending (16,000 units)
188,800 (16,000# $6.60) + (8,000#  $10.40)
Total costs accounted for
$766,800
Summary of variances for current performance:
Costs added in current period at standard costs (see Step 3 above)
$264,000
$364,000
Actual costs incurred (given)
280,000
371,000
Variance
$ 16,000 U
$ 7,000 U
*Equivalent units to complete beginning work in process from Solution Exhibit 17-25A, Step 2.
†
Equivalent units started and completed from Solution Exhibit 17-25A, Step 2.
#
Equivalent units in work in process, ending from Solution Exhibit 17-25A, Step 2.
17-14
17-27 (35–40 min.) Transferred-in costs, weighted-average method.
1, 2. & 3. Solution Exhibit 17-27A calculates the equivalent units of work done to date.
Solution Exhibit 17-27B calculates the cost per equivalent unit of work done to date for
transferred-in costs, direct materials, and conversion costs, summarizes total costs to account for,
and assigns these costs to units completed and transferred out and to units in ending work-inprocess inventory.
SOLUTION EXHIBIT 17-27A
Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units
Weighted-Average Method of Process Costing;
Finishing Department of Aragon Industrials for June 2007.
(Step 1)
Flow of Production
Physical
Units
Work in process, beginning (given)
50
Transferred in during current period (given) 90
To account for
140
Completed and transferred out
during current period
100
Work in process, ending* (given)
40
40  100%; 40  0%; 40  75%
Accounted for
140
Work done to date
(Step 2)
Equivalent Units
TransferredDirect
Conversion
in Costs
Materials
Costs
100
100
100
40
0
30
140
100
130
*Degree of completion in this department: transferred-in costs, 100%; direct materials, 0%; conversion costs, 75%.
17-15
SOLUTION EXHIBIT 17-27B
Steps 3, 4, and 5: Compute Cost per Equivalent Unit, Summarize Total Costs to Account For, and Assign Total Costs to Units
Completed and to Units in Ending Work in Process;
Weighted-Average Method of Process Costing,
Finishing Department of Aragon Industrials for June 2007.
(Step 3)
(Step 4)
(Step 5)
a
b
Work in process, beginning (given)
Costs added in current period (given)
Costs incurred to date
Divide by equivalent units of work done to date
(Sol. Exh. 17-27A)
Cost per equivalent unit of work done to date
Total costs to account for
Assignment of costs:
Completed and transferred out (100 units)
Work in process, ending (40 units):
Total costs accounted for
Total
Production Transferred-in
Costs
Costs
$ 70,000
$ 50,000
172,000
95,000
$ 145,000
_______
$242,000
Conversion
Costs
$20,000
52,000
$72,000
 100
$ 250
 130
$553.85
$183,956 (100 a  $1,035.71) + (100 a  $250) + (100 a  $553.85)
58,044 (40b  $1,035.71) + (0b  $250) + (30b  $553.85)
$242,000
Equivalent units completed and transferred out from Sol. Exhibit 17-27, step 2.
Equivalent units in ending work in process from Sol. Exhibit 17-27A, step 2.
17-16
 140
$1,035.71
Direct
Materials
$
0
25,000
$25,000
17-28 (35–40 min.) Transferred-in costs, FIFO method.
Solution Exhibit 17-28A calculates the equivalent units of work done in the current period (for
transferred-in costs, direct-materials, and conversion costs) to complete beginning work-inprocess inventory, to start and complete new units, and to produce ending work in process.
Solution Exhibit 17-28B calculates the cost per equivalent unit of work done in the current
period for transferred-in costs, direct materials, and conversion costs, summarizes total costs to
account for, and assigns these costs to units completed and transferred out and to units in ending
work-in-process inventory.
SOLUTION EXHIBIT 17-28A
Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units
FIFO Method of Process Costing;
Finishing Department of Aragon Industrials for June 2007.
(Step 1)
Flow of Production
Work in process, beginning (given)
Transferred-in during current period (given)
To account for
Completed and transferred out during current period:
From beginning work in processa
[50  (100% – 100%); 50  (100% – 0%); 50  (100% – 60%)]
Started and completed
(50  100%; 50  100%; 50  100%)
Work in process, endingc (given)
(40  100%; 40  0%; 40  75%)
Accounted for
Work done in current period only
(Step 2)
Equivalent Units
Physical Transferred-in Direct
Conversion
Units
Costs
Materials
Costs
50
(work done before current period)
90
140
50
0
50
20
50
50
50
40
0
30
90
100
100
50b
40
140
a
Degree of completion in this department: Transferred-in costs, 100%; direct materials, 0%; conversion costs, 60%.
b
100 physical units completed and transferred out minus 50 physical units completed and transferred out from beginning
work-in-process inventory.
Degree of completion in this department: transferred-in costs, 100%; direct materials, 0%; conversion costs, 75%.
c
17-17
SOLUTION EXHIBIT 17-28B
Steps 3, 4, and 5: Compute Cost per Equivalent Unit, Summarize Total Costs to Account For, and Assign Total Costs to Units
Completed and to Units in Ending Work in Process;
FIFO Method of Process Costing,
Finishing Department of Aragon Industrials for June 2007.
Work in process, beginning (given) ($40,000 + $0 + $20,000)
(Step 3) Costs added in current period (given)
Divide by equivalent units of work done in current period
(Sol. Exhibit 17-28A)
Cost per equivalent unit of work done in current period
(Step 4) Total costs to account for
(Step 5) Assignment of costs:
Completed and transferred out (100 units)
Work in process, beginning (50 units)
Costs added to beginning work in process in current period
Total from beginning inventory
Started and completed (50 units)
Total costs of units completed and transferred out
Work in process, ending (40 units):
Total costs accounted for
a
Total
Production Transferred-in
Direct
Conversion
Costs
Costs
Materials
Costs
$ 60,000
(costs of work done before current period)
164,200
$87,200
$25,000
$52,000
 90
$968.89
17-18
250
 100
$
520
$224,200
$ 60,000
22,900
82,900
86,944
169,844
54,356
$224,200
(0a  $968.89) + (50 a  $250)
+ (20 a  $520)
(50b  $968.89) + (50b  $250)
+ (50b  $520)
(40c  $968.89) + (0c  $250)
+ (30c  $520)
Equivalent units used to complete beginning work in process from Solution Exhibit 17-28A, step 2.
Equivalent units started and completed from Solution Exhibit 17-28A, step 2.
c
Equivalent units in ending work in process from Solution Exhibit 17-28A, step 2.
b
 100
$
17-29 (15 min.) Operation costing (chapter appendix).
Costs of Work Order 815 and Work Order 831 are as follows:
Number of units (pairs)
Direct materials costs
Conversion costs:
Cutting (1,000; 5,000 × $10)
Sewing (1,000; 5,000 × $15)
Lining (1,000; 0 × $8)
Packing (1,000; 5,000 × $2)
Total costs
Total cost per unit
Work Order 815
1,000
$30,000
Work Order 831
5,000
$ 50,000
10,000
15,000
8,000
2,000
$65,000
50,000
75,000
–
10,000
$185,000
$65,000
= $65
1,000
17-19
$185,000
= $37
5,000
17-30 (25 min.) Weighted-average method.
1.
Since direct materials are added at the beginning of the assembly process, the units in this
department must be 100% complete with respect to direct materials. Solution Exhibit 17-30A
shows equivalent units of work done to date:
Direct materials
Conversion costs
100 equivalent units
97 equivalent units
2. & 3. Solution Exhibit 17-30B calculates cost per equivalent unit of work done to date,
summarizes the total Assembly Department costs for October 2007, and assigns these costs to
units completed (and transferred out) and to units in ending work in process using the weightedaverage method.
SOLUTION EXHIBIT 17-30A
Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;
Weighted-Average Method of Process Costing, Assembly Department of Global Defense, Inc.,
for October 2007.
(Step 1)
Flow of Production
Work in process, beginning (given)
Started during current period (given)
To account for
Completed and transferred out
during current period
Work in process, ending* (given)
10  100%; 10  70%
Accounted for
Work done to date
Physical
Units
20
80
100
90
10
(Step 2)
Equivalent Units
Direct
Conversion
Materials
Costs
90
90
10
7
100
97
100
*Degree of completion in this department: direct materials, 100%; conversion costs, 70%.
17-20
SOLUTION EXHIBIT 17-30B
Steps 3, 4, and 5: Compute Cost per Equivalent Unit, Summarize Total Costs to Account For,
and Assign Total Costs to Units Completed and to Units in Ending Work in Process;
Weighted-Average Method of Process Costing, Assembly Department of Global Defense,
Inc., for October 2007.
(Step 3)
(Step 4)
(Step 5)
Work in process, beginning (given)
Costs added in current period (given)
Costs incurred to date
Divide by equivalent units of work done to date
(Solution Exhibit 17-30A)
Cost per equivalent unit of work done to date
Total costs to account for
Assignment of costs:
Completed and transferred out (90 units)
Work in process, ending (10 units)
Total costs accounted for
Total
Production
Costs
$ 580,000
2,935,000
Direct
Materials
$ 460,000
2,000,000
$2,460,000
Conversion
Costs
$ 120,000
935,000
$1,055,000

$

97
$10,876.29
100
24,600
$3,515,000
$3,192,866
322,134
$3,515,000
(90*  $24,600) + (90*  $10,876.29)
(10†  $24,600) + (7†  $10,876.29)
*
Equivalent units completed and transferred out from Solution Exhibit 17-30A, Step 2.
Equivalent units in work in process, ending from Solution Exhibit 17-30A, Step 2.
†
17-31 (10 min.) Journal entries (continuation of 17-30).
1.
2.
3.
Work in Process––Assembly Department
Accounts Payable
Direct materials purchased and used in
production in October.
2,000,000
Work in Process––Assembly Department
Various accounts
Conversion costs incurred in October.
935,000
Work in Process––Testing Department
Work in Process––Assembly Department
Cost of goods completed and transferred out
in October from the Assembly Department
to the Testing Department.
2,000,000
935,000
3,192,866
Work in Process––Assembly Department
Beginning inventory, October 1
580,000 3. Transferred out to
1. Direct materials
2,000,000
Work in Process–Testing
2. Conversion costs
935,000
Ending Inventory, October 31
322,134
17-21
3,192,866
3,192,866
17-32 (20 min.) FIFO method (continuation of 17-30).
1.
The equivalent units of work done in the current period in the Assembly Department in
October 2007 for direct materials and conversion costs are shown in Solution Exhibit 17-32A.
2.
The cost per equivalent unit of work done in the current period in the Assembly
Department in October 2007 for direct materials and conversion costs is calculated in Solution
Exhibit 17-32B.
3.
Solution Exhibit 17-32B summarizes the total Assembly Department costs for October
2007, and assigns these costs to units completed (and transferred out) and units in ending work in
process under the FIFO method.
The cost per equivalent unit of beginning inventory and of work done in the current
period differ:
Direct materials
Conversion costs
*
Beginning
Inventory
$23,000 ($460,000  20 equiv. units)
$10,000 ($120,000  12 equiv. units)
Cost per equivalent unit (weighted-average)
Cost per equivalent unit (FIFO)
Direct
Materials
$24,600*
$25,000**
Work Done in
Current Period
$25,000
$11,000
Conversion
Costs
$10,876.29*
$11,000**
from Solution Exhibit 17-30B
from Solution Exhibit 17-32B
**
The cost per equivalent unit differs between the two methods because each method uses different
costs to calculate the numerator of the calculation. FIFO uses only the costs added during the
period whereas weighted-average uses the costs from the beginning work-in-process as well as
costs added during the period. Both methods also use different equivalent units in the
denominator.
The following table summarizes the costs assigned to units completed and those still in
process under the weighted-average and FIFO process-costing methods for our example.
Weighted
Average
(Solution
Exhibit 17-30B)
Cost of units completed and transferred out
$3,192,866
Work in process, ending
322,134
Total costs accounted for
$3,515,000
17-22
FIFO
(Solution
Exhibit 17-32B) Difference
$3,188,000
–$4,866
327,000
+$4,866
$3,515,000
The FIFO ending inventory is higher than the weighted-average ending inventory by
$4,866. This is because FIFO assumes that all the lower-cost prior-period units in work in
process are the first to be completed and transferred out while ending work in process consists of
only the higher-cost current-period units. The weighted-average method, however, smoothes out
cost per equivalent unit by assuming that more of the higher-cost units are completed and
transferred out, while some of the lower-cost units in beginning work in process are placed in
ending work in process. So, in this case, the weighted-average method results in a higher cost of
units completed and transferred out and a lower ending work-in-process inventory relative to
FIFO.
SOLUTION EXHIBIT 17-32A
Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;
FIFO Method of Process Costing,
Assembly Department of Global Defense Inc. for October 2007.
(Step 1)
Flow of Production
Work in process, beginning (given)
Started during current period (given)
To account for
Completed and transferred out during current
period:
From beginning work in process§
20  (100%  100%); 20  (100%  60%)
Started and completed
70 100%, 70  100%
Work in process, ending* (given)
10  100%; 10  70%
Accounted for
Work done in current period only
§
Physical
Units
20
80
100
(Step 2)
Equivalent Units
Direct
Conversion
Materials
Costs
(work done before current period)
20
0
8
70
70
10
7
80
85
70†
10
100
Degree of completion in this department: direct materials, 100%; conversion costs, 60%.
90 physical units completed and transferred out minus 20 physical units completed and transferred out from
beginning work-in-process inventory.
*Degree of completion in this department: direct materials, 100%; conversion costs, 70%.
†
17-23
SOLUTION EXHIBIT 17-32B
Steps 3, 4, and 5: Compute Cost per Equivalent Unit, Summarize Total Costs to Account For, and Assign Total Costs to Units
Completed and to Units in Ending Work in Process;
FIFO Method of Process Costing, Assembly Department of Global Defense, Inc., for October 2007.
Work in process, beginning ($460,000 + $120,000)
(Step 3) Costs added in current period (given)
Divide by equivalent units of work done in
current period (Solution Exhibit 17-32A)
Cost per equivalent unit of work done in current period
(Step 4) Total costs to account for
(Step 5) Assignment of costs:
Completed and transferred out (90 units):
Work in process, beginning (20 units)
Costs added to beg. work in process in current period
Total from beginning inventory
Started and completed (70 units)
Total costs of units completed & transferred out
Work in process, ending (10 units)
Total costs accounted for
Total
Production
Costs
$ 580,000
2,935,000
Conversion
Costs
(costs of work done before current period)
$2,000,000
$935,000
 80
25,000
 85
$ 11,000
$
$3,515,000
$ 580,000
88,000
668,000
2,520,000
3,188,000
327,000
$3,515,000
*Equivalent units used to complete beginning work in process from Solution Exhibit 17-32A, Step 2.
†
Equivelant units started and completed from Solution Exhibit 17-32A, Step 2.
#
Equivalent units in work in process, ending from Solution Exhibit 17-32A, Step 2.
17-24
Direct
Materials
(0*  $25,000)
+ (8*  $11,000)
(70†  $25,000)
+ (70†  $11,000)
(10#  $25,000)
+ (7#  $11,000)
17-33 (30 min.) Transferred-in costs, weighted-average method (related to 17-30 to 17-32).
1.
Transferred-in costs are 100% complete, and direct materials are 0% complete in both
beginning and ending work-in-process inventory. The reason is that transferred-in costs are
always 100% complete as soon as they are transferred in from the Assembly Department to the
Testing Department. Direct materials in beginning or ending work in process for the Testing
Department are 0% complete because direct materials are added only when the testing process is
90% complete and the units in beginning and ending work in process are only 70% and 60%
complete, respectively.
2.
Solution Exhibit 17-33A computes the equivalent units of work done to date in the
Testing Department for transferred-in costs, direct materials, and conversion costs.
3.
Solution Exhibit 17-33B calculates the cost per equivalent unit of work done to date in
the Testing Department for transferred-in costs, direct materials, and conversion costs,
summarizes total Testing Department costs for October 2007, and assigns these costs to units
completed and transferred out and to units in ending work in process using the weighted-average
method.
4.
Journal entries:
a. Work in Process––Testing Department
Work in Process––Assembly Department
Cost of goods completed and transferred out
during October from the Assembly
Department to the Testing Department
b. Finished Goods
Work in Process––Testing Department
Cost of goods completed and transferred out
during October from the Testing Department
to Finished Goods inventory
17-25
3,192,866
3,192,866
9,303,123
9,303,123
SOLUTION EXHIBIT 17-33A
Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;
Weighted-Average Method of Process Costing,
Testing Department of Global Defense, Inc., for October 2007.
(Step 1)
Physical
Flow of Production
Units
Work in process, beginning (given)
30
Transferred in during current period (given) 90
To account for
120
Completed and transferred out
during current period
105
Work in process, ending* (given)
15
15  100%; 15  0%; 15  60%
Accounted for
120
Work done to date
(Step 2)
Equivalent Units
Transferred-in
Direct
Conversion
Costs
Materials
Costs
105
105
105
15
0
9
120
105
114
*Degree of completion in this department: transferred-in costs, 100%; direct materials, 0%; conversion costs, 60%.
17-26
SOLUTION EXHIBIT 17-33B
Steps 3, 4, and 5: Compute Cost per Equivalent Unit, Summarize Total Costs to Account For, and Assign Total Costs to Units Completed and
to Units in Ending Work in Process;
Weighted-Average Method of Process Costing,
Testing Department of Global Defense, Inc., for October 2007.
(Step 3) Work in process, beginning (given)
Costs added in current period (given)
Costs incurred to date
Divide by equivalent units of work done to date
(Solution Exhibit 17-33A)
Equivalent unit costs of work done to date
(Step 4) Total costs to account for
(Step 5) Assignment of costs:
Completed and transferred out (105 units)
Work in process, ending (15 units)
Total costs accounted for
Total
Production
Costs
$1,317,600
8,658,866
_________
$9,976,466
Direct
Materials
$
0
3,885,000
$3,885,000
 120
34,822.22
 105
37,000
$
$
Conversion
Costs
$ 331,800
1,581,000
$1,912,800
$
 114
16,778.95
$9,303,123 (105*  $34,822.22) + (105* $37,000) + (105* $16,778.95)
673,343 ( 15†  $34,822.22) + (0†  $37,000) + (9†  $16,778.95)
$9,976,466
*Equivalent units completed and transferred out from Solution Exhibit 17-33A, Step 2.
†
Equivalent units in work in process, ending from Solution Exhibit 17-33A, Step 2.
17-27
Transferred
-in Costs
$ 985,800
3,192,866
$4,178,666
17-34 (30 min.) Transferred-in costs, FIFO method (continuation of 17-33).
1.
As explained in Problem 17-33, requirement 1, transferred-in costs are 100% complete
and direct materials are 0% complete in both beginning and ending work-in-process inventory.
2.
The equivalent units of work done in October 2007 in the Testing Department for
transferred-in costs, direct materials, and conversion costs are calculated in Solution Exhibit 1734A.
3.
Solution Exhibit 17-34B calculates the cost per equivalent unit of work done in October
2007 in the Testing Department for transferred-in costs, direct materials, and conversion costs,
summarizes total Testing Department costs for October 2007, and assigns these costs to units
completed and transferred out and to units in ending work in process using the FIFO method.
4.
Journal entries:
a. Work in Process––Testing Department
Work in Process––Assembly Department
Cost of goods completed and transferred out
during October from the Assembly Dept. to
the Testing Dept.
b. Finished Goods
Work in Process––Testing Department
Cost of goods completed and transferred out
during October from the Testing Department
to Finished Goods inventory.
17-28
3,188,000
3,188,000
9,281,527
9,281,527
SOLUTION EXHIBIT 17-34A
Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;
FIFO Method of Process Costing,
Testing Department of Global Defense, Inc., for October 2007.
Flow of Production
Work in process, beginning (given)
Transferred-in during current period (given)
To account for
Completed and transferred out during current
period:
From beginning work in process§
30  (100%  100%); 30  (100%  0%);
30  (100%  70%)
Started and completed
75  100%; 75  100%; 75  100%
Work in process, ending* (given)
15  100%; 15  0%; 15  60%
Accounted for
Work done in current period only
§
(Step 1)
Physical
Units
30
90
120
(Step 2)
Equivalent Units
TransferredDirect
Conversion
in Costs
Materials
Costs
(work done before current period)
30
75†
0
30
9
75
75
75
15
0
9
90
105
93
15
120
Degree of completion in this department: Transferred-in costs, 100%; direct materials, 0%; conversion costs, 70%.
105 physical units completed and transferred out minus 30 physical units completed and transferred out from
beginning work-in-process inventory.
*Degree of completion in this department: transferred-in costs, 100%; direct materials, 0%; conversion costs, 60%.
†
17-29
SOLUTION EXHIBIT 17-34B
Steps 3, 4, and 5: Compute Cost per Equivalent Unit, Summarize Total Costs to Account For, and Assign Total Costs to Units
Completed and to Units in Ending Work in Process;
FIFO Method of Process Costing,
Testing Department of Global Defense, Inc., for October 2007.
Work in process, beginning
($331,800 + $0 + $980,060))
(Step 3) Costs added in current period (given)
Divide by equivalent units of work done in
current period (Solution Exhibit 17-34A)
Cost per equiv. unit of work done in current period
(Step 4) Total costs to account for
(Step 5) Assignment of costs:
Completed and transferred out (105 units):
Work in process, beginning (30 units)
Costs added to beg. work in process in current period
Total from beginning inventory
Started and completed (75 units)
Total costs of units completed & transferred out
Work in process, ending (15 units)
Total costs accounted for
Total
Production
Costs
Transferred
-in Costs
$1,311,860
8,654,000
(Costs of work done before current period)
$3,188,000
$3,885,000
$1,581,000
$
$
 105
37,000
Conversion
Costs
$
 93
17,000
$9,965,860
$1,311,860
1,263,000 (0*  $35,422.22) + (30*  $37,000) + (9*  $17,000)
2,574,860
6,706,667 (75†  $35,422.22) + (75†  $37,000) + (75†  $17,000)
9,281,527
684,333 (15#  $35,422.22) + (0#  $37,000) + (9#  $17,000)
$9,965,860
*Equivalent units used to complete beginning work in process from Solution Exhibit 17-34A, Step 2.
†
Equivalent units started and completed from Solution Exhibit 17-34A, Step 2.
#
Equivalent units in work in process, ending from Solution Exhibit 17-34A, Step 2.
17-30
 90
35,422.22
Direct
Materials
17-35 (25 min.) Weighted-average method.
Solution Exhibit 17-35A shows equivalent units of work done to date of:
Direct materials
Conversion costs
2,500 equivalent units
2,125 equivalent units
Note that direct materials are added when the Forming Department process is 10%
complete. Both the beginning and ending work in process are more than 10% complete and
hence are 100% complete with respect to direct materials.
Solution Exhibit 17-35B calculates cost per equivalent unit of work done to date for
direct materials and conversion costs, summarizes the total Forming Department costs for April
2007, and assigns these costs to units completed (and transferred out), and to units in ending
work in process using the weighted-average method.
SOLUTION EXHIBIT 17-35A
Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;
Weighted-Average Method of Process Costing, Forming Department of Star Toys for April
2007.
(Step 1)
Flow of Production
Work in process, beginning (given)
Started during current period (given)
To account for
Completed and transferred out
during current period
Work in process, ending* (given)
500  100%; 500  25%
Accounted for
Work done to date
Physical
Units
300
2,200
2,500
2,000
500
(Step 2)
Equivalent Units
Direct
Conversion
Materials
Costs
2,000
2,000
500
125
2,500
2,125
2,500
*
Degree of completion in this department: direct materials, 100%; conversion costs, 25%.
17-31
SOLUTION EXHIBIT 17-35B
Steps 3, 4, and 5: Compute Cost per Equivalent Unit, Summarize Total Costs to Account For,
and Assign Total Costs to Units Completed and to Units in Ending Work in Process;
Weighted-Average Method of Process Costing, Forming Department of Star Toys, April 2007.
Total
Production
Costs
(Step 3) Work in process, beginning (given)
Costs added in current period (given)
Costs incurred to date
Divide by equivalent units of work done to
date (Solution Exhibit 17-35A)
Cost per equivalent unit of work done to date
(Step 4) Total costs to account for
(Step 5) Assignment of costs:
Completed and transferred out (2,000 units)
Work in process, ending (500 units)
Total costs accounted for
*
$
9,625
112,500
Direct
Materials
Conversion
Costs
$ 7,500
70,000
$77,500
$ 2,125
42,500
$44,625
 2,500
$
31
 2,125
$
21
$122,125
$104,000
18,125
$122,125
(2,000* $31) + (2,000* $21)
(500†  $31) + (125†  $21)
Equivalent units completed and transferred out from Solution Exhibit 17-35A, Step 2.
Equivalent units in work in process, ending from Solution Exhibit 17-35A, Step 2.
†
17-32
17-36 (5–10 min.)
Journal entries (continuation of 17-35).
1. Work in Process––Forming Department
Accounts Payable
To record direct materials purchased and
used in production during April
70,000
2. Work in Process––Forming Department
Various Accounts
To record Forming Department conversion
costs for April
42,500
3. Work in Process––Finishing Department
Work in Process––Forming Department
To record cost of goods completed and transferred
out in April from the Forming Department
to the Finishing Department
70,000
42,500
104,000
104,000
Work in Process––Forming Department
Beginning inventory, April 1
9,625 3. Transferred out to
1. Direct materials
70,000
Work in Process––Finishing
2. Conversion costs
42,500
Ending inventory, April 30
18,125
17-33
104,000
17-37 (20 min.) FIFO method (continuation of 17-35).
The equivalent units of work done in April 2007 in the Forming Department for direct materials
and conversion costs are shown in Solution Exhibit 17-37A.
Solution Exhibit 17-37B calculates the cost per equivalent unit of work done in April 2007
in the Forming Department for direct materials and conversion costs, summarizes the total
Forming Department costs for April 2007, and assigns these costs to units completed (and
transferred out) and to units in ending work in process under the FIFO method.
The equivalent units of work done in beginning inventory is: direct materials, 300  100%
= 300; and conversion costs 300  40% = 120. The cost per equivalent unit of beginning
inventory and of work done in the current period are:
Direct materials
Conversion costs
Beginning
Inventory
$25 ($7,500  300)
$17.708 ($2,125  120)
Work Done in
Current Period
(Calculated Under
FIFO Method)
$31.818
$21.197
The following table summarizes the costs assigned to units completed and those still in
process under the weighted-average and FIFO process-costing methods for our example.
Cost of units completed and transferred out
Work in process, ending
Total costs accounted for
Weighted
Average
FIFO
(Solution
(Solution
Exhibit 17-35B) Exhibit 17-37B) Difference
$104,000
$103,566
–$434
18,125
18,559
+$434
$122,125
$122,125
The FIFO ending inventory is higher than the weighted-average ending inventory by $434.
This is because FIFO assumes that all the lower-cost prior-period units in work in process are the
first to be completed and transferred out while ending work in process consists of only the
higher-cost current-period units. The weighted-average method, however, smoothes out cost per
equivalent unit by assuming that more of the higher-cost units are completed and transferred out,
while some of the lower-cost units in beginning work in process are placed in ending work in
process. Hence, in this case, the weighted-average method results in a higher cost of units
completed and transferred out and a lower ending work-in-process inventory relative to FIFO.
17-34
SOLUTION EXHIBIT 17-37A
Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;
FIFO Method of Process Costing, Forming Department of Star Toys for April 2007.
Flow of Production
Work in process, beginning (given)
Started during current period (given)
To account for
Completed and transferred out during current period:
From beginning work in process§
300  (100%  100%); 300  (100%  40%)
Started and completed
1,700  100%; 1,700  100%
Work in process, ending* (given)
500  100%; 500  25%
Accounted for
Work done in current period only
(Step 1)
Physical
Units
300
2,200
2,500
(Step 2)
Equivalent Units
Direct
Conversion
Materials
Costs
(work done before current period)
300
0
180
1,700
1,700
500
125
2,200
2,005
1,700†
500
2,500
§
Degree of completion in this department: direct materials, 100%; conversion costs, 40%.
2,000 physical units completed and transferred out minus 300 physical units completed and transferred out from
beginning work-in-process inventory.
*Degree of completion in this department: direct materials, 100%; conversion costs, 25%.
†
SOLUTION EXHIBIT 17-37B
Steps 3, 4, and 5: Compute Cost per Equivalent Unit, Summarize Total Costs to Account For,
and Assign Total Costs to Units Completed and to Units in Ending Work in Process;
FIFO Method of Process Costing, Forming Department of Star Toys for April 2007.
Total
Production
Costs
Work in process, beginning
(given: $7,500 + $2,125)
(Step 3) Costs added in current period (given)
Divide by equivalent units of work done in
current period (Exhibit 17-37A)
Cost per equivalent unit of work done in current
period
(Step 4) Total costs to account for
(Step 5) Assignment of costs:
Completed and transferred out (2,000 units):
Work in process, beginning (300 units)
Costs added to begin. work in process in
current period
Total from beginning inventory
Started and completed (1,700 units)
Total costs of units completed & tsfd. out
Work in process, ending (500 units)
Total costs accounted for
$ 9,625
112,500
Direct
Materials
Conversion
Costs
(work done before current period)
$70,000
$42,500
 2,200
 2,005
$31.818
$21.197
$122,125
$ 9,625
3,815
13,440
90,126
103,566
18,559
$122,125
(0*  $31.818) + (180*  $21.197)
(1,700†  $31.818) + (1,700†  $21.197)
(500#  $31.818) + (125#  $21.197)
*Equivalent units used to complete beginning work in process from Solution Exhibit 17-37A, Step 2.
†
Equivelant units started and completed from Solution Exhibit 17-37A, Step 2.
#
Equivalent units in work in process, ending from Solution Exhibit 17-37A, Step 2.
17-35
17-38 (30 min.) Transferred-in costs, weighted average.
1.
Solution Exhibit 17-38A computes the equivalent units of work done to date in the
Spinning Department for transferred-in costs, direct materials, and conversion costs.
Solution Exhibit 17-38B calculates the cost per equivalent unit of work done to date in
the Spinning Department for transferred-in costs, direct materials, and conversion costs,
summarizes total Spinning Department costs for April 2007, and assigns these costs to units
completed and transferred out and to units in ending work in process using the weighted-average
method.
2.
Journal entries:
a. Work in Process––Spinning Department
Work in Process––Drawing Department
Cost of goods completed and transferred out
during April from the Drawing Department
to the Spinning Department
b. Finished Goods
Work in Process––Spinning Department
Cost of goods completed and transferred out
during April from the Spinning Department
to Finished Goods inventory
96,000
96,000
166,008
166,008
SOLUTION EXHIBIT 17-38A
Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;
Weighted-Average Method of Process Costing,
Spinning Department of Jhirmack Woolen Mills for April 2007.
(Step 1)
Flow of Production
Work in process, beginning (given)
Transferred-in during current period (given)
To account for
Completed and transferred out during current period:
Work in process, endinga (given)
(400  100%; 400  0%; 400  60%)
Accounted for
Work done to date
a
(Step 2)
Equivalent Units
Physical Transferred- Direct Conversion
Units
in Costs Materials Costs
600
1,800
2,400
2,000
2,000
2,000
2,000
400
400
0
240
2,400
2,400
2,000
2,240
Degree of completion in this department: transferred-in costs, 100%; direct materials, 0%; conversion costs, 60%.
17-36
SOLUTION EXHIBIT 17-38B
Steps 3, 4, and 5: Compute Cost per Equivalent Unit, Summarize Total Costs to Account For, and Assign Total Costs to
Units Completed and to Units in Ending Work in Process;
Weighted-Average Method of Process Costing,
Spinning Department of Jhirmack Woolen Mills for April 2007.
(Step 3)
(Step 4)
(Step 5)
a
b
Work in process, beginning (given)
Costs added in current period (given)
Costs incurred to date
Divide by equivalent units of work done to date
(Solution Exhibit 17-38A)
Cost per equivalent unit of work done to date
Total costs to account for
Assignment of costs:
Completed and transferred out (2,000 units)
Work in process, ending (400 units):
Total costs accounted for
Total
Production Transferred-in
Costs
Costs
$ 31,850
$ 21,850
159,800
96,000
$117,850
2,400
$ 49.104
Conversion
Costs
$10,000
46,000
$56,000
2,000
$ 8.90
2,240
$
25
$191,650
$166,008
25,642
$191,650
Equivalent units completed and transferred out from Sol. Exhibit 17-38A, step 2.
Equivalent units in ending work in process from Sol. Exhibit 17-38A, step 2.
17-37
Direct
Materials
$
0
17,800
$17,800
(2,000a  $49.104) + (2,000a  $8.90) + (2,000a  $25)
(400b  $49.104) + (0b  $8.90) + (240b  $25)
17-39 (30 min.) Transferred-in costs, FIFO method (continuation of 17-38).
1.
Solution Exhibit 17-39A calculates the equivalent units of work done in April 2007 in the
Spinning Department for transferred-in costs, direct materials, and conversion costs.
Solution Exhibit 17-37B calculates the cost per equivalent unit of work done in April
2007 in the Spinning Department for transferred-in costs, direct materials, and conversion costs,
summarizes total Spinning Department costs for April 2007, and assigns these costs to units
completed and transferred out and to units in ending work in process using the FIFO method.
Journal entries:
a. Work in Process––Spinning Department
Work in Process––Drawing Department
Cost of goods completed and transferred out
during April from the Drawing Department to
the Spinning Department.
b.
Finished Goods
Work in Process––Spinning Department
Cost of goods completed and transferred out
during April from the Spinning Department
to Finished Goods inventory.
94,500
94,500
160,100
160,100
2.
The equivalent units of work done in beginning inventory is: Transferred-in costs, 600 
100% = 600; direct materials, 600  0% = 0; and conversion costs, 600  40% = 240. The cost
per equivalent unit of beginning inventory and of work done in the current period are:
Transferred-in costs (weighted average)
Transferred-in costs (FIFO)
Direct materials
Conversion costs
Beginning
Inventory
$36.42 ($21,850  600)
$30.53 ($18,320  600)
—
$41.67 ($10,000  240)
Work Done in
Current Period
$53.33 ($96,000  1,800)
$52.50 ($94,500  1,800)
$8.90
$25
The following table summarizes the costs assigned to units completed and those still in
process under the weighted-average and FIFO process-costing methods for the Spinning
Department.
Cost of units completed and transferred out
Work in process, ending
Total costs accounted for
Weighted
Average
FIFO
(Solution
(Solution
Exhibit 17-38B) Exhibit 17-39B)
$166,008
$160,100
25,642
26,520
$191,650
$186,620
17-38
Difference
–$5,908
+$ 878
The FIFO ending inventory is higher than the weighted-average ending inventory by $878.
This is because FIFO assumes that all the lower-cost prior-period units in work in process
(resulting from the lower transferred-in costs in beginning inventory) are the first to be
completed and transferred out while ending work in process consists of only the higher-cost
current-period units. The weighted-average method, however, smoothes out cost per equivalent
unit by assuming that more of the higher-cost units are completed and transferred out, while
some of the lower-cost units in beginning work in process are placed in ending work in process.
Hence, in this case, the weighted-average method results in a higher cost of units completed and
transferred out and a lower ending work-in-process inventory relative to FIFO. Note that the
difference in cost of units completed and transferred out (–$5,908) does not fully offset the
difference in ending work-in-process inventory (+$878). This is because the FIFO and weightedaverage methods result in different values for transferred-in costs with respect to both beginning
inventory and costs transferred in during the period.
SOLUTION EXHIBIT 17-39A
Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;
FIFO Method of Process Costing,
Spinning Department of Jhirmack Woolen Mills for April 2007.
(Step 1)
Flow of Production
Work in process, beginning (given)
Transferred-in during current period (given)
To account for
Completed and transferred out during current period:
From beginning work in processa
[600  (100% – 100%); 600  (100% – 0%); 600
Started and completed
(1,400  100%; 1,400  100%; 1,400  100%)
Work in process, endingc (given)
(400  100%; 400 x 0%; 400  60%)
Accounted for
Work done in current period only
a
(Step 2)
Equivalent Units
Physical Transferred-in Direct
Conversion
Units
Costs
Materials
Costs
600
(work done before current period)
1,800
2,400
 (100% – 40%)]
600
0
600
400
____
2,400
1,400
1,400
1,400
400
____
1,800
0
____
2,000
240
____
2,000
Degree of completion in this department: Transferred-in costs, 100%; direct materials, 0%; conversion costs, 40%.
b 2,000
physical units completed and transferred out minus 600 physical units completed and transferred out from beginning
work-in-process inventory.
c
360
1,400b
Degree of completion in this department: transferred-in costs, 100%; direct materials, 0%; conversion costs, 60%.
17-39
SOLUTION EXHIBIT 17-39B
Steps 3, 4, and 5: Compute Cost per Equivalent Unit, Summarize Total Costs to Account For, and Assign Total Costs to Units Completed
and to Units in Ending Work in Process;
FIFO Method of Process Costing,
Spinning Department of Jhirmack Woolen Mills for April 2007.
Work in process, beginning (given: $18,320 + $10,000)
(Step 3) Costs added in current period (given)
Divide by equivalent units of work done in current period (Sol.
Exhibit 17-39A)
Cost per equivalent unit of work done in current period
(Step 4) Total costs to account for
(Step 5) Assignment of costs:
Completed and transferred out (2,000 units)
Work in process, beginning (600 units)
Costs added to beginning work in process in current period
Total from beginning inventory
Started and completed (1,400 units)
Total costs of units completed and transferred out
Work in process, ending (400 units):
Total costs accounted for
a
Total
Production
Costs
$ 28,320
158,300
_______
$186,620
$ 28,320
13,620
41,940
118,160
160,100
26,520
$186,620
Transferred-in
Direct
Conversion
Costs
Materials
Costs
(costs of work done before current period)
$94,500
$17,800
$46,000
 1,800
$ 52.50
(0a  $52.50) +
17-40
 2,000
$ 23.00
(600a  $8.90) + (360a  $23)
(1,400b  $52.50) + (1,400b  $8.90) + (1,400b  $23)
(400c  $52.50) +
Equivalent units used to complete beginning work in process from Solution Exhibit 17-39A, step 2.
Equivalent units started and completed from Solution Exhibit 17-39A, step 2.
c
Equivalent units in ending work in process from Solution Exhibit 17-39A, step 2.
b
 2,000
$ 8.90
(0c  $8.90) + (240c  $23)
17-40 (45 min.) Transferred-in costs, weighted-average and FIFO methods.
1.
Solution Exhibit 17-40A computes the equivalent units of work done to date in the
Drying and Packaging Department for transferred-in costs, direct materials, and conversion
costs. Solution Exhibit 17-40B calculates the cost per equivalent unit of work done to date in the
Drying and Packaging Department for transferred-in costs, direct materials, and conversion
costs, summarizes total Drying and Packaging Department costs for week 37, and assigns these
costs to units completed and transferred out and to units in ending work in process using the
weighted-average method.
2.
Solution Exhibit 17-40C computes the equivalent units of work done in week 37 in the
Drying and Packaging Department for transferred-in costs, direct materials, and conversion
costs. Solution Exhibit 17-40D calculates the cost per equivalent unit of work done in week 37 in
the Drying and Packaging Department for transferred-in costs, direct materials, and conversion
costs, summarizes total Drying and Packaging Department costs for week 37, and assigns these
costs to units completed and transferred out and to units in ending work in process using the
FIFO method.
SOLUTION EXHIBIT 17-40A
Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;
Weighted-Average Method of Process Costing,
Drying and Packaging Department of Frito-Lay Inc. for Week 37.
(Step 1)
(Step 2)
Equivalent Units
Physical
TransferredDirect
Conversion
Flow of Production
Units
in Costs
Materials
Costs
Work in process, beginning (given)
1,250
Transferred in during current period (given) 5,000
To account for
6,250
Completed and transferred out
during current period
5,250
5,250
5,250
5,250
Work in process, ending* (given)
1,000
1,000  100%; 1,000  0%; 1,000  40%
1,000
0
400
Accounted for
6,250
Work done to date
6,250
5,250
5,650
*Degree of completion in this department: transferred-in costs, 100%; direct materials, 0%; conversion costs, 40%.
17-41
SOLUTION EXHIBIT 17-40B
Steps 3, 4, and 5: Compute Cost per Equivalent Unit, Summarize Total Costs to Account For, and Assign Total Costs
to Units Completed and to Units in Ending Work in Process;
Weighted-Average Method of Process Costing,
Drying and Packaging Department of Frito-Lay Inc. for Week 37.
(Step 3) Work in process, beginning (given)
Costs added in current period (given)
Costs incurred to date
Divide by equivalent units of work done
to date (Solution Exhibit 17-40A)
Equivalent unit costs of work done to date
(Step 4) Total costs to account for
(Step 5) Assignment of costs:
Completed and transferred out (5,250 units)
Work in process, ending (1,000 units)
Total costs accounted for
*
Total
Production
Costs
$ 38,060
159,600

$
6,250
20
Direct
Materials
$
0
25,200
$25,200
Conversion
Costs
$ 9,060
38,400
$47,460
 5,250
$ 4.80
 5,650
$ 8.40
$197,660
$174,300
23,360
$197,660
Equivalent units completed and transferred out from Solution Exhibit 17-40A, Step 2.
†Equivalent units in work in process, ending from Solution Exhibit 17-40A, Step 2.
17-42
Transferred
-in Costs
$ 29,000
96,000
$125,000
(5,250* $20) + (5,250* $4.80) + (5,250* $8.40)
(1,000† $20) + (0†  $4.80 ) + (400†  $8.40)
SOLUTION EXHIBIT 17-40C
Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;
FIFO Method of Process Costing,
Drying and Packaging Department of Frito-Lay Inc. for Week 37.
Flow of Production
Work in process, beginning (given)
Transferred-in during current period (given)
To account for
Completed and transferred out during current period:
From beginning work in process§
1,250  (100%  100%); 1,250  (100%  0%);
1,250  (100%  80%)
Started and completed
4,000  100%; 4,000  100%; 4,000  100%
Work in process, ending* (given)
1,000  100%; 1,000  0%; 1,000  40%
Accounted for
Work done in current period only
§
(Step 1)
Physical
Units
1,250
5,000
6,250
(Step 2)
Equivalent Units
TransferredDirect
Conversion
in Costs
Materials
Costs
(work done before current period)
1,250
4,000†
0
1,250
250
4,000
4,000
4,000
1,000
0
400
5,000
5,250
4,650
1,000
6,250
Degree of completion in this department: Transferred-in costs, 100%; direct materials, 0%; conversion costs, 80%.
5,250 physical units completed and transferred out minus 1,250 physical units completed and transferred out from
beginning work-in-process inventory.
*Degree of completion in this department: transferred-in costs, 100%; direct materials, 0%; conversion costs, 40%.
†
17-43
SOLUTION EXHIBIT 17-40D
Steps 3, 4, and 5: Compute Cost per Equivalent Unit, Summarize Total Costs to Account For, and Assign Total Costs to
Units Completed and to Units in Ending Work in Process;
FIFO Method of Process Costing,
Drying and Packaging Department of Frito-Lay Inc. for Week 37.
Total
Production
Costs
Work in process, beginning
($9,060 + $0 + $28,920)
(Step 3) Costs added in current period (given)
Divide by equivalent units of work done in
current period (Solution Exhibit 17-40C)
Cost per equiv. unit of work done in current period
(Step 4) Total costs to account for
(Step 5) Assignment of costs:
Completed and transferred out (5,250 units):
Work in process, beginning (1,250 units)
Costs added to beg. work in process in current period
Total from beginning inventory
Started and completed (4,000 units)
Total costs of units completed & transferred out
Work in process, ending (1,000 units)
$ 37,980
157,600
Transferred
-in Costs
 5,000
$ 18.80
17-44
 5,250
$ 4.80
 4,650
$ 8.258
$195,580
$ 37,980
8,065
46,045
127,432
173,477
22,103
$195,580
(0*  $18.80) + (1,250*  $4.80) +
(250*  $8.258)
(4,000†  $18.80) + (4,000†  $4.80) + (4,000†  $8.258)
(1,000#  $18.80) +
Equivalent units used to complete beginning work in process from Solution Exhibit 17-40C, Step 2.
Equivalent units started and completed from Solution Exhibit 17-40C, Step 2.
#
Equivalent units in work in process, ending from Solution Exhibit 17-40C, Step 2.
†
Conversion
Costs
(Costs of work done before current period)
$94,000
$25,200
$38,400
Total costs accounted for
*
Direct
Materials
(0#  $4.80) +
(400#  $8.258)
17-41 (25 min.)
1.
Standard costing with beginning and ending work in process.
Solution Exhibit 17-41A shows equivalent units of work done in the current period:
Direct materials
Conversion costs
20,000 equivalent units
18,700 equivalent units
Solution Exhibit 17-41B uses the standard costs of work done in the current period:
direct materials, $6; conversion costs, $3; to summarize the total Cooking Department costs for
May 2007, and assign these costs to units completed (and transferred out) and to units in ending
work in process using the standard costing method.
2.
May variances for direct materials and conversion costs are as follows:
Output in equivalent units for May
Standard costs of May month's output
Direct materials, $6; Conversion costs, $3
Actual costs incurred during May (given)
Variances
Direct Materials
20,000
Conversion Costs
18,700
$120,000
125,000
$ 5,000 U
$56,100
57,000
$ 900 U
SOLUTION EXHIBIT 17-41A
Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;
Use of Standard Costs in Process Costing, Cooking Department of Victoria Corporation for May
2007.
Flow of Production
Work in process, beginning (given)
Started during current period (given)
To account for
Completed and transferred out during current period:
From beginning work in process§
3,000  (100%  100%); 3,000  (100%  60%)
Started and completed
15,000  100%; 15,000  100%
Work in process, ending* (given)
5,000  100%; 5,000  50%
Accounted for
Work done in current period only
§
(Step 1)
Physical
Units
3,000
20,000
23,000
(Step 2)
Equivalent Units
Direct
Conversion
Materials
Costs
3,000
0
1,200
15,000
15,000
5,000
2,500
20,000
18,700
15,000||
5,000
23,000
Degree of completion in this department: direct materials, 100%; conversions, 60%.
18,000 physical units completed and transferred out minus 3,000 physical units completed and transferred out from
beginning work-in-process inventory.
*Degree of completion in this department: direct materials, 100%; conversion costs, 50%.
||
17-45
SOLUTION EXHIBIT 17-41B
Steps 3, 4, and 5: Compute Cost per Equivalent Unit, Summarize Total Costs to Account For,
and Assign Total Costs to Units Completed and to Units in Ending Work in Process;
Use of Standard Costs in Process Costing, Cooking Department of Victoria Corporation for May
2007.
Total
Production
Costs
(Step 3) Standard cost per equivalent unit (given)
Work in process, beginning (given)
Costs added in current period at standard costs
(Step 4) Total costs to account for
(Step 5) Assignment of costs at standard costs:
Completed and transferred out (18,000 units):
Work in process, beginning (3,000 units)
Costs added to beg. work in process in current period
Total from beginning inventory
Started and completed (15,000 units)
Total costs of units completed and transferred out
Work in process, ending (5,000 units)
Total costs accounted for
Summary of variances for current performance
Costs added in current period at standard costs (see Step 3 above)
Actual costs incurred (given)
Variance
$ 23,400
176,100
$199,500
$ 23,400
3,600
27,000
135,000
162,000
37,500
$199,500
*Equivalent units to complete beginning work Solution Exhibit 17-41A, Step 2.
†
Equivalent units started and completed from Solution Exhibit 17-41A, Step 2.
#
Equivalent units in work in process, ending from Solution Exhibit 17-41A, Step 2.
17-46
Direct
Conversion
Materials
Costs
$
6
$
3
(3,000  $6) + (1,800  $3)
(20,000  $6) + (18,700  $3)
(0*  $6)
+ (1,200*  $3)
(15,000† $6) + (15,000† $3)
(5,000#  $6) + (2,500#  $3)
$120,000
125,000
$ 5,000 U
$56,100
57,000
$ 900 U
17-42 (25-30 min.) Operation costing, equivalent units.
1.
Materials and conversion costs of each operation, the total units produced, and the
material and conversion cost per unit for the month of May are as follows:
Extrusion
11,000
$132,000
12.00
269,500
24.50
1. Units produced
2. Materials costs
3. Materials cost per unit (2 ÷1)
4. Conversion costs
5. Conversion cost per unit (4 ÷ 1)
Form
11,000
$ 44,000
4.00
132,000
12.00
Trim
5,000
$15,000
3.00
69,000
13.80
Finish
2,000
$12,000
6.00
42,000
21.00
The unit cost and total costs in May for each product are as follows:
Cost Elements
Extrusion materials
Form materials
Trim materials
Finish materials
Extrusion conversion
Form conversion
Trim conversion
Finish conversion
Total unit cost
Multiply by units produced
Total product costs
Standard
Model
Deluxe
Model
$
12.00
4.00
–
–
24.50
12.00
–
–
$ 52.50
× 6,000
$315,000
$ 12.00
4.00
3.00
–
24.50
12.00
13.80
–
$ 69.30
× 3,000
$207,900
2.
$ 12.00
4.00
3.00
6.00
24.50
12.00
13.80
21.00
$ 96.30
× 2,000
$192,600
Equivalent
Units
Total Costs
$12.00
1,000
$12,000
24.50
1,000
24,500
4.00
1,000
4,000
12.00
3.00
13.80
1,000
1,000
600*
Unit Cost
Deluxe model work-in process costs
at the trim operation
Extrusion material
(100% complete when transferred in)
Extrusion conversion
(100% complete when transferred in)
Form material
(100% complete when transferred in)
Form conversion
(100% complete when transferred in)
Trim material (100% complete)
Trim conversion (60% complete)
Work-in-process costs
Executive
Model
*1,000 units × 60% complete
17-47
12,000
3,000
8,280
$63,780
17-43 (20 min.) Equivalent-unit computations, benchmarking, ethics.
1.
The reported monthly cost per equivalent unit of either direct materials or conversion
costs is lower when the plant manager overestimates the percentage of completion of ending
work in process; the overestimate increases the denominator and, thus, decreases the cost per
equivalent unit. The plant manager has two motivations to report lower cost per equivalent unit
numbers: (1) to get a bonus and (2) to be recognized in the company newsletter.
2.
While the plant controller has responsibility for preparing the accounting reports for the
plant, in most cases, the plant controller reports directly to the plant manager. If this reporting
relationship exists, Major may create a conflict of interest situation for the plant controller. Only
if the plant controller reports directly to the corporate controller, and indirectly to the plant
manager, should Major show the letters to the plant controller without simultaneously showing
them to the plant manager.
3.
The plant controller’s ethical responsibilities to Major and to Leisure Suits are the same.
These include:
 Competence: The plant controller is expected to have the competence to make
equivalent unit computations. This competence does not always extend to making
estimates of the percentage of completion of a product. In Leisure Suits’s case,
however, the products are probably easy to understand and observe. Hence, a plant
controller could obtain reasonably reliable evidence on percentage of completion at a
plant.
 Objectivity: The plant controller should not allow the possibility of the plant being
written about favorably in the company newsletter to influence the way equivalent
unit costs are computed. The plant controller has a responsibility to communicate
information fairly and objectively.
4.
Major could seek evidence on possible manipulations as follows:
a. Have plant controllers report detailed breakdowns on the stages of production and
then conduct end-of-month audits to verify the actual stages completed for ending
work in process.
b. Examine trends in ending work in process. Divisions that report low amounts of
ending work in process relative to total production are not likely to be able to greatly
affect equivalent unit cost amounts by manipulating percentage of completion
estimates. Divisions that show sizable quantities of total production in ending work in
process are more likely to be able to manipulate equivalent cost computations by
manipulating percentage of completion estimates.
17-48
17-44 (45 min.) Transferred-in costs, equivalent unit costs, working backward.
1.
The equivalent units of work done in the current period for each cost category are
computed in Solution Exhibit 17-44B using data on costs added in current period and cost per
equivalent unit of work done in current period.
TransferredDirect
In Costs
Materials
$58,500
$57,000
Costs added in current period
Divided by cost per equivalent unit of work
done in current period
Equivalent units of work done
in current period
2.
 $6.50
9,000

Conversion
Costs
$57,200
$3
 $5.20
19,000
11,000
Physical units completed Physical units in beginning Physical
Physical units in ending



and transferred out
work in process
units added
work in process
= 15,000 + 9,000  5,000 = 19,000
Solution Exhibit 17-44A shows the equivalent units of work done in June to complete
beginning work in process and the equivalent units of work done in June to start and complete
4,000 units. Note that direct materials in beginning work in process is 0% complete because it is
added only when the process is 80% complete and the beginning WIP is only 60% complete. We
had calculated the total equivalent units of work done in the current period in requirement 1:
transferred-in costs, 9,000; direct materials, 19,000; and conversion costs, 11,000. The missing
number is the equivalent units of each cost category in ending work in process (see Solution
Exhibit 17-44A).
Transferred-in costs
Direct materials
Conversion costs
5,000
0
1,000
3.
Percentage of completion for each cost category in ending work in process can be
calculated by dividing equivalent units in ending work in process for each cost category by
physical units of work in process (5,000 units).
Transferred-in costs
Direct materials
Conversion costs
5,000  5,000 = 100%
0  5,000 =
0%
1,000  5,000 = 20%
4.
Solution Exhibit 17-44B summarizes the total costs to account for, and assigns these
costs to units completed and transferred out and to units in ending work in process.
17-49
SOLUTION EXHIBIT 17-44A
Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;
FIFO Method of Process Costing,
Thermo-assembly Department of Lennox Plastics for June 2007.
Flow of Production
Work in process, beginning (given)
Transferred-in during current period (given)
To account for
Completed and transferred out during current period:
From beginning work in process§
15,000  (100%  100%); 15,000  (100%  0%);
15,000  (100%  60%)
Started and completed
4,000  100%; 4,000  100%; 4,000  100%
Work in process, ending* (given)
5,000  100%; 5,000  0%; 5,000  20%
Accounted for
Work done in current period only
(from Solution Exhibit 17-44B)
§
(Step 1)
Physical
Units
15,000
9,000
24,000
(Step 2)
Equivalent Units
TransferredDirect
Conversion
in Costs
Materials
Costs
(work done before current period)
15,000
0
15,000
6,000
4,000
4,000
4,000
5,000
0
1,000
9,000
19,000
11,000
4,000†
5,000
24,000
Degree of completion in this department: transferred-in costs, 100%; direct materials, 0%;
conversion costs, 60%.
†
19,000 physical units completed and transferred out minus 15,000 physical units completed and transferred out
from beginning work-in-process inventory.
*Degree of completion in this department: transferred-in costs, 100%; direct materials, 0%; conversion costs, 20%.
17-50
SOLUTION EXHIBIT 17-44B
Steps 3, 4, and 5: Compute Cost per Equivalent Unit, Summarize Total Costs to Account For, and Assign Total Costs to
Units Completed and to Units in Ending Work in Process;
FIFO Method of Process Costing,
Thermo-assembly Department of Lennox Plastics for June 2007.
Total
Production
Costs
Work in process, beginning
($90,000 + $0 + $45,000)
$135,000
(Step 3) Costs added in current period (given)
172,700
Divide by equivalent units of work done in
current period
Cost per equiv. unit of work done in current period
(Step 4) Total costs to account for
$307,700
(Step 5) Assignment of costs:
Completed and transferred out (19,000 units):
Work in process, beginning (15,000 units)
$135,000
Costs added to beg. work in process in current period
76,200
Total from beginning inventory
211,200
Started and completed (4,000 units)
58,800
Total costs of units completed & transferred out
270,000
Work in process, ending (5,000 units)
37,700
Total costs accounted for
$307,700
Transferred
-in Costs
Conversion
Costs
(Costs of work done before current period)
$58,500
$57,000
$57,200
 9,000
$ 6.50
19,000
$
3
11,000
$ 5.20
(0* $6.50) + (15,000*  $3) + (6,000*  $5.20)
(4,000† $6.50) + (4,000† $3) + (4,000†  $5.20)
(5,000# $6.50) +
*Equivalent units used to complete beginning work in process from Solution Exhibit 17-44A, Step 2.
†
Equivalent units started and completed from Solution Exhibit 17-44A, Step 2.
#
Equivalent units in work in process, ending from Solution Exhibit 17-44A, Step 2.
17-51
Direct
Materials
(0#  $3) + (1,000# $5.20)
Chapter 17 Video Case
The video case can be discussed using only the case writeup in the chapter. Alternatively,
instructors can have students view the videotape of the company that is the subject of the case.
The videotape can be obtained by contacting your Prentice Hall representative. The case
questions challenge students to apply the concepts learned in the chapter to a specific business
situation.
NANTUCKET NECTARS: Process Costing
1.
In a process-costing system, the unit cost of a product or service is obtained by assigning
total costs to many identical or similar units, in this case, single-serve juice beverage bottles.
2.
Direct Material Item
Raw ingredients for juices
(water, cane sugar, fruit juice concentrates, etc.)
Bottles and caps
Labels, cardboard trays, shrink-wrap
Stage in Production Process
Beginning
Middle
End
3.
Conversion costs include labor associated with the production line, depreciation on
production equipment, plant utilities, plant maintenance costs, and plant property taxes.
4.
In the process described for the manufacture of Nantucket Nectars juices, there is no
partially completed inventory, as the product is mixed and bottled within a few hours each
production day. Accordingly, the calculation of equivalent units in this case makes little sense.
As there is no partially completed ending inventory, there will be no difference between the cost
of the units transferred out under the weighted average or FIFO methods.
17-52