PROCESS COSTING

Topics: Inventory, Costs, Supply chain management terms 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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