# PROCESS COSTING

Pages: 15 (2125 words) Published: February 16, 2015
1. Cost of Production Report:
A company's Department 2 costs for June were:
Cost from Department 1
Cost added in Department 2:
Materials
Labor
Factory overhead (FOH)

\$16320
43,415
56,100
58,575

The quantity schedule shows 12,000 units were received during the month from Department 1; 7,000 units were transferred to finished goods; and 5,000 units in process at the end of June were 50% complete as to materials cost and 25% complete as to conversion cost.

Required: Prepare Cost of production report.

Solution:
Department 2
Cost of Production Report
For the Month of June, 19___
Quantity Schedule:
Units received from department 1
Units transferred to finished goods
Units still in process (50% materials, 25% conversion)
Cost Charged to the Department:
Cost from preceding department:
Transferred in during the month (12,000 units)
Cost added by department:
Materials
Labor
Factory overhead
Total cost added
Total cost to be accounted for

12,000
7,000
5,000
Total cost

Unit cost

\$16,320
-------

\$1.36
------

\$43,415
56,100
58,575
------\$158,090
-------\$174,410
=======

\$4.57
6.80
7.10
------\$18.47
------\$19.83
=====

Cost Accounted for as Follows:
Transferred to finished goods (7,000 × \$19.83)
Work in process ending inventory:
Cost from preceding department
Materials (5,000 × 50% × \$4.75)
Labor (5,000 × 25% × \$6.80)
Factory overhead (5,000 × 25% × \$7.10)

\$138,810
\$6,800
11,425
8,500
8,875
--------

Total cost accounted for

Additional computations:
Equivalent production:
Materials = 7,000 + (5,000 × 50%) = 9,500 units
Labor and factory overhead = 7,000 + (5,000 × 25%) = 8,250 units

35,600
-------\$174,410
=======

2. Cost of Production Report - Normal Loss:
For December, the Production Control Department of Carola Chemical, Inc., reported the following production data for Department 2:

Transferred in from Department 1
Transferred out to Department 3
In process at the end of December

55,000 liters
39,500liters
10,500 liters

(with 1/2 labor and factory overhead)

All materials were put into process in Department 1. The cost department collected following figures for department 2:

Unit cost for units transferred in from department 1
Labor cost in department 2
Applied factory overhead

\$1.80
\$27,520
\$15480

Required: A cost of production report for department 2 for December.

Solution:
Carola Chemical Inc.
Department 2
Cost of Production Report
For the Month of December. 19____
Quantity Schedule:
Units received from preceding department
Units transferred to next department
Units still in process (1/3 labor and overhead)
Units lost in process
Cost Charged to the Department:
Cost from preceding department:
Transferred in during the month
Cost added by the department:
Labor [39,500 + (1/3 × 10,500) = 43,000 units]
Factory overhead
Total cost added
Adjustment for lost units
Total cost to be accounted for

55,000
======
39,500
10,500
5,000
------Total Cost

55,000
======
Unit Cost

\$99,000
--------

\$1.80
------

\$27,520
\$15,480
-------\$43,000

\$0.64
\$0.36
-----\$1.00
\$0.18*
-----\$2.98
=====

-------\$142,000
=======

Cost Accounted for as Follows:
Transferred to next department (39,500 × \$2.98)
Work in process - ending inventory:
Cost from preceding department (10,500 × \$1.98)
Labor (10,500 × 1/3 × \$0.64)
Factory overhead (10,500 × 1/3 × \$0.36)
Total cost accounted for

\$117,710
\$20,790
2,240
1,260
--------

24,290
------\$142,000
======

*Adjustment for lost units:
Formula for Calculation:
(Cost from preceding departments / Units from preceding departments - Lost units) - Unit cost from preceding department
(99,000 / 50,000) - 1.80 = \$0.18
OR
(5,000 × 1.80) = \$9,000 / 50,000 = \$0.18

3. Cost of Production Report:
Brooks Inc. uses process costing. The costs for Department 2 for April were: Cost from preceding department
Cost added by...

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