CHAPTER 6

JOB ORDER AND PROCESS COSTING

QUESTIONS FOR WRITING AND DISCUSSION
1. Job-order costing accumulates costs by
jobs, and process costing accumulates costs
by processes. Job-order costing is suitable
for operations that produce custom-made
products that receive different doses of
manufacturing costs. Process costing, on
the other hand, is suitable for operations that
produce homogeneous products that receive
equal doses of manufacturing costs in each
process.
2. More paperwork is required. Labor and materials are assigned to departments in a
process-costing system. In a job-order costing system, labor and materials must be
tracked to each job, requiring time tickets
and more use of materials requisitions. Additionally, a job-order costing system requires
a separate job-order cost sheet for each job.
3. Job-order costing is appropriate for many
service firms. The key factor is that differing
amounts of resources must be used for different jobs. Examples of service firms that
use job-order costing are law firms, accounting firms, dentists, automobile repair, and
architectural firms.
4. Unless all your jobs (lawns) are the same
size and require the same services, you will
need to use a job-order costing system. At
minimum, you will need job-order cost
sheets for each customer. You will need labor time tickets to record the amount of time
spent on each job, both to cost the job and
to pay the individual doing the work. A materials requisition form may be needed if fertilizer or weed control products are used (alternatively, it may be possible to just list the
amount of product used directly on the joborder cost sheet). The more complicated
your business becomes (e.g., mowing,
trimming, fertilizing, trimming shrubbery, and
planting shrubs and trees), the more source
documents will be needed to keep track of
time, materials, and use of capital equipment (e.g., trimmers and brushhogs).
5. The cost of a job is often strongly related to
the price charged. Logically enough, the
higher the cost of the job, the higher the
price charged to the customer. This relation-

145

ship makes sense not only to the business

but also to the customer. By comparing the
cost of the individual job with the price
charged, the firm can determine the profit attributable to each job. Then, the firm can decide whether the profit is sufficient to continue offering the product or service under the
current terms.
6. Materials requisition forms serve as the
source documents for posting materials
usage and costs to individual jobs. Time or
work tickets serve a similar function for labor. Predetermined overhead rates are used
to allocate overhead to jobs.
7. In sequential processing, products pass
through a series of processes, one after
another (i.e., in a given sequence). In parallel processing, products pass through two or
more different sequences at the same time,
merging eventually at the final process.
8. Equivalent units are the number of whole
units that could have been produced, given
the amount of materials, labor, and overhead used. Equivalent units are the measure of a periods output, a necessary input
for the computation of unit costs in a
process-costing system.
9. In calculating this periods unit cost, the
weighted average method treats prior-period
output and costs carried over to the current
period as belonging to the current period.
The FIFO method excludes any costs and
output carried over from this periods unit
cost computation.
10. If the per-unit cost of the prior period is the
same as the per-unit cost of the current period, there will be no difference between the
results of the weighted average and FIFO
methods. Additionally, if no beginning workin-process inventory exists, both the FIFO
and weighted average methods give the
same results.
11. Separate equivalent units must be calculated for materials and conversion costs.
12. Transferred-in units represent partially completed units and are clearly a material for the

receiving department. To complete the

product (or further process it), additional materials and conversion costs are added by
the receiving department.
13. The work-in-process account of the receiving department is debited, and the work-inprocess account of the transferring department is credited. The finished goods account is debited, and the work-in-process
account of the final department is credited
upon completion of the product.
14.

The first step is the preparation of a physical

flow schedule. This schedule identifies the
physical units that must be accounted for
and provides an accounting. The second
step is the equivalent unit schedule. This
schedule computes the equivalent whole
output for the period. The schedules computations rely on information from the physical flow schedule. The next step is computation of the unit cost. To compute the unit
cost, the manufacturing costs of the period
for the process are divided by the periods
output. The output is obtained from the
equivalent unit schedule. The fourth step

146

uses the unit cost to value goods transferred

out and those remaining in work in process.
The final step checks to see if the costs assigned in step 4 equal the total costs to account for.
15.

The weighted average method uses the

same unit cost for all goods transferred out.
The FIFO method divides goods transferred
out into two categories: units started and
completed and units from beginning work in
process. The periods unit cost is used to
value goods started and completed. The
cost of goods transferred out from beginning
work in process is obtained by (1) assigning
them all costs carried over from the prior period and (2) using the current periods unit
cost to value the equivalent units completed
this period.

16.

Service firms generally do not have work-inprocess inventories, and so equivalent units
of production are not needed. An important
factor in process costing for services is determining just what constitutes a unit of output.

EXERCISES
61
Job-Order
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
l.
m.
n.
o.

Paint manufacturing
Auto manufacturing
Toy manufacturing
Custom cabinet making
Airplane manufacturing
Personal computer assembly
Furniture making
Custom furniture making
Dental services
Hospital services
Paper manufacturing
Auto repair
Architectural services
Landscape design services
Light bulb manufacturing

Process
X
X
X

X
X
X
X
X
X
X
X
X
X
X
X

62
1.

2.

3.

4.

Auto manufacturing: A job-order example might be Rolls Royce, in which the

cars are made to order. A process-costing example might be Ford Motor
Company.
Dental services: A job-order example might be a local, full-service dentist. A
process-costing example might be a denturist (someone who makes only
dentures).
Auto repair: A job-order example might be a local mechanic or the service
department of an automobile dealership. A process-costing example might be
a shop that is dedicated to oil changes.
Costume making: A job-order example might be a local seamstress who will
make the costumes for children in a junior high school play. A processcosting example might be a firm dedicated to the manufacture of dance costumes that are sold nationwide. The designs are preset.

147

63
1.
Beginning balance
Direct materials
Direct labor
Applied overhead
Total cost

Job #614
$10,200
4,200
1,800
1,080
$17,280

Job #615
$ 9,670
9,500
4,000
2,400
$25,570

Job #616
$
0
1,000
150
90
$1,240

Job #617
$
0
3,150
800
480
$4,430

2.

Ending balance in Work in Process = Job #614 + Job #616 + Job #617
= $17,280 + $1,240 + $4,430 = $22,950

3.

Cost of Goods Sold = Job #615 = $25,570

Price of Job #615 = $25,570 + (0.4)($25,570) = $35,798

64
1.

Overhead applied in October:

Job #265: 0.75 $15,000 = $11,250
Job #266: 0.75 $12,000 = $9,000
Job #267: 0.75 $1,900 = $1,425
Job #268: 0.75 $7,000 = $5,250

2.
Beginning balance
Direct materials
Direct labor
Applied overhead
Total cost

Job #265
$30,330
13,000
15,000
11,250
$69,580

Job #266
$62,170
7,000
12,000
9,000
$90,170

Job #267
$
0
3,500
1,900
1,425
$6,825

Job #268
$
0
4,750
7,000
5,250
$17,000

3.

Ending balance in Work in Process = Job #266 + Job #267 + Job #268
= $90,170 + $6,825 + $17,000 = $113,995

4.

Cost of Goods Sold = Job #265 = $69,580

Price of Job #265 = $69,580 + (0.30)($69,580) = $90,454

148

65
1.

Direct materials
Direct labor (50 hours $10)
Overhead (50 hours $4)
Total cost
Units
Unit cost

$ 3,400
500
200
$ 4,100

10
$ 410

2.

Price per home = 1.5 $410 = $615

3.

Jordan would need to prepare a simple form that included columns for the
date, the beginning time, the ending time, the total number of hours worked,
and the job name (or number). She could have a separate page for each day.
This would be especially helpful if she hired other employees from time to
time to work on jobs.

66
1.

Ending balance in
Work in Process

= Job #902 + Job #906 + Job #908 + Job #909

= $400 + $750 + $700 + $905 = $2,755

2.

Ending balance in Finished Goods = Job #901 + Job #903 + Job #905 + Job #910
= $650 + $550 + $860 + $803 = $2,863

3.

Cost of Goods Sold = Job #904 + Job #907 = $695 + $180 = $875

149

67
1.

Balance, 7/1
Direct materials
Direct labor
Applied overhead:
Power1
Material handling2
Purchasing3
Total cost

Job #70
$ 25,000
12,900
20,000

Job #71
$
0
9,900
6,500

Job #72
$
0
35,350
13,000

500
1,250
400
$ 60,050

400
250
1,600
$18,650

2,400
5,000
400
$ 56,150

Job#70:$2 per mh 250

Job#71:$2 per mh 200
Job#72:$2 per mh 1,200

Job#70:$25 per move 50 moves

Job#71:$25 per move 10 moves
Job#72:$25 per move 200 moves

Job#70: $40 per PO 10 POs

Job#71:$40 per PO 40 POs
Job#72: $40 per PO 10 POs

2.

Ending balance in Work in Process = Job #72 = $56,150

3.

Ending balance in Finished Goods = Job #71 = $18,650

4.

Cost of Goods Sold = Job #70 = $60,050

68
Bosserman Company
Income Statement
For the Month Ended July 31, 20XX
Sales ($60,050 1.40) .................................................
Cost of goods sold .....................................................
Gross margin ..............................................................
Selling expenses (0.10 $84,070 + $4,100) ..............
Administrative expenses ...........................................
Operating income .......................................................

150

$ 84,070
60,050
$ 24,020
12,507
3,900
$ 7,613

69
1.

Applied overhead = Direct labor cost Overhead rate

$140,000= $80,000 Overhead rate
Overhead rate= 1.75 or 175% of direct labor cost

2.

$140,000
138,500
$ 1,500

3.

Direct materials
Direct labor
Overhead applied

Applied overhead
Actual overhead
Overapplied overhead
$ 40,000
80,000
140,000
$ 260,000
17,000
(32,000)
$ 245,000

Add: Beginning work in process

Less: Ending work in process
Cost of goods manufactured

4. Overhead Control ......................................

Cost of Goods Sold .............................

1,500
1,500

Adjusted cost of goods sold:

$ 210,000
(1,500)
$ 208,500
5.

Direct materials ($32,000 $10,000 $17,500)

Direct labor (1,000 $10)
Overhead applied (175% $10,000)
Ending work in process

151

$ 4,500
10,000
17,500
$ 32,000

610
1.

Overhead rate = $180,000/20,000 = $9 per DLH

2.

Direct materials
Direct labor
Applied overhead
Total cost

$ 4,140
4,000
3,600*
$ 11,740

*$3,600 = $9 ($4,000/$10)
3.

Overhead Control ......................................

Lease Payable ...........................................
Accumulated Depreciation .......................
Wages Payable ..........................................
Utilities Payable ........................................
Other Payables ..........................................

189,300

Work in Process ($9 21,000)..................

Overhead Control ......................................

189,000

4.

Actual overhead
Applied overhead
Underapplied overhead

$189,300
189,000
$
300

5.

Normal cost of goods sold

Add: Underapplied overhead
Adjusted cost of goods sold

$740,000
300
$740,300

5,000
20,000
101,300
18,000
45,000
189,000

611
1.

Cutting
Department
$5,400
150
750

Direct materials
Direct labor
Applied overhead
Transferred-in cost:
From cutting
From sewing
Total manufacturing cost

Sewing
Department
$
900
1,800
3,600

Packaging
Department
$
225
900
900

6,300
$6,300

$12,600

2. a. Transferred from Cutting to Sewing $6,300

b. Transferred from Sewing to Packaging $12,600
c. Transferred from Packaging to Finished Goods $14,625

152

12,600
$14,625

3.

Unit cost = $14,625/600 = $24.38* per pair

*Rounded

612
1.

Equivalent unit, Ending work in process = 300 0.20 = 60

2.

Equivalent units in Total = 60 + 600 = 660

613
1.

2.

Physical flow schedule:

Units in beginning work in process
Units started during the period
Total units to account for

14,000
40,000
54,000

Units transferred out

Units in ending work in process
Total units accounted for

45,500
8,500
54,000

Equivalent units of production:

Units completed
Add: Units in ending work in process:
(8,500 100%)
(8,500 25%)
Equivalent units of output

153

Materials
45,500

Conversion
45,500

8,500
54,000

2,125
47,625

614
1.

Cost of ending work in process:

Materials ($1.30 0)
Conversion ($0.50 4,800)
Total cost

$
0
2,400
$2,400

Cost of goods transferred out: $1.80 45,000 = $81,000

2.

Physical flow schedule:

Units to account for:
Units in beginning WIP
?
Units started
?
Total units
53,000

Units accounted for:

Units completed
Units in ending WIP
Total units

45,000
8,000
53,000

The schedule of equivalent units using the weighted average method does
not give sufficient information to reconstruct the complete physical flow
schedule. Units in beginning work in process are embedded in units completed.

154

615
1.

Department 1:
a. Units transferred to Department 2 = Total units* Ending WIP
= 6,480 3,600
= 2,880
*Total units = Beginning WIP + Units started = 0 + 6,480 = 6,480
b.
Units completed
Add: Units in ending work in process:
3,600 100%
3,600 50%
Equivalent units of output

2.

Materials
2,880

Conversion
2,880

3,600
6,480

1,800
4,680

Department 2:
a. Units transferred out = Total units* Ending WIP = 4,080 600 = 3,480
*Total units = Beginning WIP + Units transferred in = 1,200 + 2,880 = 4,080
b.
Units completed
Add: Units in ending work in process:
600 0%
600 40%
Equivalent units of output

155

Materials
3,480

Conversion
3,480

0
3,480

240
3,720

616
1.

Physical flow schedule:

Units to account for:
Units in beginning work in process
Units started during the period
Total units to account for

60,000
220,000
280,000

Units accounted for:

Units completed and transferred out:
Started and completed
From beginning work in process
Units in ending work in process
Total units accounted for
2.

180,000
60,000

Units completed
Add: Units in ending WIP Fraction complete
(40,000 20%)
Equivalent units of output

3.

Unit cost = ($1,171,800 + $390,600)/248,000 = $6.30

4.

Cost transferred out = 240,000 $6.30 = $1,512,000

Cost of ending WIP = 8,000 $6.30 = $50,400

5.

Costs to account for:

Beginning work in process
Incurred during June
Total costs to account for

390,600
1,171,800
$ 1,562,400

Costs accounted for:

Goods transferred out
Goods in ending work in process
Total costs accounted for

156

$1,512,000
50,400
$1,562,400

240,000
40,000
280,000
240,000
8,000
248,000

617

Cocolots Company
Mixing Department
Production Report
For the Month of June 20XX
(Weighted Average Method)

Unit Information
Physical flow:
Units to account for:
Units accounted for:
Units in beginning WIP 60,000
Units completed
Units started
220,000
Units in ending WIP
Total units to account for 280,000
Total units accounted for
Equivalent units:
Units completed
Units in ending work in process
Total equivalent units

240,000
40,000
280,000

240,000
8,000
248,000

Cost Information
Costs to account for:
Beginning work in process
Incurred during March
Total costs to account for

$ 390,600
1,171,800
$1,562,400

Cost per equivalent unit

6.30

Costs accounted for:

Transferred
Out
Goods transferred out
($6.30 240,000)
Goods in ending WIP
($6.30 8,000)
Total costs accounted for

Ending
Work in Process

Total

$1,512,000

$1,512,000

$1,512,000

$50,400
$50,400

50,400
$1,562,400

157

618
Completed
Ending WIP
Equivalent units

B
24,000c
0
24,000

A
16,200a
1,000b
17,200

C
31,000d
900e
31,900

D
60,000f
2,500g
62,500

(9,000 0.10)
(30,000 + 40,000 10,000)
g
(10,000 0.25)

(3,200 + 17,000 4,000)

b
(4,000 0.25)
c
(1,000 + 23,000 0)
d
(40,000 9,000)

619
Completed*
Add: Ending WIP*
Less: Beginning WIP**
Equivalent units

A
16,200
1,000
960
16,240

B
24,000
0
400
23,600

C
31,000
900
0
31,900

D
60,000
2,500
22,500
40,000

*See solution to Exercise 618.

**Beginning WIP for A: 3,200 0.30 = 960
Beginning WIP for B: 1,000 0.40 = 400
Beginning WIP for C: 0 0 = 0
Beginning WIP for D: 30,000 0.75 = 22,500

620
1.

Physical flow schedule:

Units to account for:
Units in beginning work in process
Units started during the period
Total units to account for

10,000
70,000
80,000

Units accounted for:

Units completed and transferred out:
Started and completed
50,000
From beginning work in process
10,000
Units in ending work in process (60% complete)
Total units accounted for

60,000
20,000
80,000

158

620

Concluded

2.
Units completed
Add: Units in ending WIP
Fraction complete (20,000 100%; 20,000 60%)
Equivalent units of output

Materials
60,000

Conversion
60,000

20,000
80,000

12,000
72,000

3.

Unit materials cost

($49,000 + $351,000)/80,000 =
Unit conversion cost ($2,625 + $78,735)/72,000
=
Total unit cost

4.

Cost transferred out: 60,000 $6.13 = $367,800

Cost of ending WIP:
Materials:
20,000 $5.00 =
Conversion:
12,000 $1.13 =
Total ending WIP cost

5.

$100,000
13,560
$113,560

Costs to account for:

Beginning WIP
Incurred during August
Total costs to account for

$ 51,625
429,735
$481,360

Costs accounted for:

Goods transferred out
Goods in ending WIP
Total costs accounted for

$367,800
113,560
$481,360

159

$5.00
1.13
$6.13

621
Bath Linens Department
Production Report
For the Month of August 20XX
(Weighted Average Method)
Unit Information
Physical flow:
Units to account for:
Units in beginning WIP
Units started
Total units to account for

Units accounted for:

Units completed
Units in ending WIP
Total units accounted for

10,000
70,000
80,000

60,000
20,000
80,000

Equivalent units:
Materials
60,000
20,000
80,000

Units completed
Units in ending work in process
Total equivalent units

Conversion
60,000
12,000
72,000

Cost Information
Costs to account for:
Beginning WIP
Incurred during August
Total costs to account for
Cost per equivalent unit

Materials
$ 49,000
351,000
$400,000
$

5.00

Conversion
$ 2,625
78,735
$ 81,360
$

1.13

Total
$ 51,625
429,735
$481,360
$

6.13

Costs accounted for:

Goods transferred out
($6.13 60,000)
Goods in ending WIP:
Materials ($5 20,000)
Conversion costs
($1.13 12,000)
Total costs accounted for

Transferred
Out

Ending
Work in Process

Total

$367,800

$367,800

$100,000

100,000

$367,800

13,560
$113,560

13,560
$481,360

160

622
1.
2.
3.
4.
5.
6.
7.
8.

b
d
b
b
a
c
c
e
Supporting computations:
Materials
92,000

Units completed
Units in ending WIP
(24,000 90%)
(24,000 40%)
Equivalent units (WA)
Less EU in BWIP
(16,000 60%)
(16,000 20%)

21,600
113,600

WA:

9,600
101,600

(9,600)
(3,200)

Equivalent units (FIFO)

Unit cost:
FIFO:

Conversion
92,000

104,000

$468,000/104,000
$4.50
($468,000 + $54,560)/113,600
$4.60

$573,040/98,400
$5.82
($573,040 + $35,560)/101,600
$5.99

EWIP:
FIFO: ($4.50 21,600) + ($5.82 9,600) = $153,072
WA: ($4.60 21,600) + ($5.99 9,600) = $156,864

161

98,400

623
1.

Physical flow schedule:

Units to account for:
Units in beginning work in process (75% complete)
Units started during August
Total units to account for

120,000
370,000
490,000

Units accounted for:

Units completed and transferred out:
Started and completed
280,000
From beginning work in process
120,000
Units in ending work in process (25% complete)
Total units accounted for

400,000
90,000
490,000

2. Units started and completed

280,000

Add: Units to complete beginning WIP (120,000 25%)

Add: Units ending WIP Fraction completed (90,000 30%)
Equivalent units of output
3.

FIFO unit cost = $1,516,500/337,000 = $4.50

4.

Costs transferred out:

Costs from beginning WIP
Costs to complete beginning WIP (30,000 $4.50)
Started and completed (280,000 $4.50)
Total costs transferred out

30,000
27,000
337,000

340,600
135,000
1,260,000
$ 1,735,600

Cost of ending WIP = 27,000 $4.50 = $121,500

5.

Costs to account for:

Beginning WIP
$ 340,600
Added in August
1,516,500
Total
$ 1,857,100

162

Costs accounted for:

Transferred out
Ending WIP
Total

$1,735,600
121,500
$1,857,100

624
Nogaleen Company
Blending Department
Production Report
For the Month of August 20XX
(FIFO Method)
Unit Information
Physical flow:
Units to account for:
Units in beginning work in process
Units started during August
Total units to account for
Units accounted for:
Units started and completed
Units completed from beginning
work in process
Units in ending work in process
Total units accounted for

120,000
370,000
490,000
Physical Flow
280,000

Equivalent Units
280,000

120,000
90,000
490,000

30,000
27,000
337,000

Cost Information
Costs to account for:
Beginning work in process
Incurred during August
Total costs to account for

$ 340,600
1,516,500
$1,857,100

Cost per equivalent unit

4.50

Costs accounted for:

Transferred
Out
Units in beginning work
in process:
From prior period
From current period
(30,000 $4.50)
Units started and completed
(280,000 $4.50)
Goods in ending work
in process (27,000 $4.50)
Total costs accounted for

Ending
Work in Process

Total

$ 340,600

135,000

135,000

1,260,000

1,260,000

$1,735,600

$121,500
$121,500

121,500
$1,857,100

163

340,600

625
1.

Job #64:
Direct materials
Direct labor
Overhead ($12 410)

$ 1,240
6,150
4,920
$12,310

Unit cost = $12,310/50 = $246.20

2.

Ending Work in Process = Cost of Job #65

= $985 + $8,745 + ($12 583) = $16,726

3. Finished Goods .........................................

Work in Process ..................................

12,310

Cost of Goods Sold ...................................

Finished Goods ...................................

12,310

Accounts Receivable ................................

Sales Revenue .....................................

19,696*

*(160% $12,310 = $19,696)

164

12,310
12,310
19,696

PROBLEMS
626
1.

Overhead rate = $270/$900 = 0.30 or 30% of direct labor dollars.

(This rate was calculated using information from the Fazel job; however, the
Myron and Patton jobs would give the same answer.)

2.
Beginning WIP
Direct materials
Direct labor
Applied overhead
Total

Fazel
$ 1,730
600
1,200
360
$ 3,890

Myron
$1,180
350
980
294
$2,804

Patton
$2,500
260
650
195
$3,605

Raider
$
0
780
1,350
405
$ 2,535

Willis
$
0
725
900
270
$ 1,895

Note: This is just one way of setting up the job-order cost sheets. You might
prefer to keep the detail on the materials, labor, and overhead in beginning
inventory costs.
3.

Since the Fazel and Myron jobs were completed, the others must still be in
process. Therefore, the ending balance in Work in Process is the sum of the
costs of the Patton, Raider, and Willis jobs.
Patton
Raider
Willis
Ending Work in Process

$3,605
2,535
1,895
$8,035

Cost of Goods Sold = Fazel job + Myron job = $3,890 + $2,804 = $6,694
4.

Aldrin Company
Income Statement
For the Month Ended June 30, 20XX
Sales (1.4 $6,694) ...................................................................
Cost of goods sold....................................................................
Gross margin .............................................................................
Marketing and administrative expenses .................................
Operating income......................................................................

165

$9,372
6,694
$2,678
1,200
$1,478

627
1.

Overhead rate = $90,000/10,000 = $9 per MHr

Overhead costs = $30,000 + 15,000 + 20,000 + 25,000 = $90,000
Job #1
$4,500
1,000
1,800
$7,300
2,190
$9,490

Direct materials
Direct labor
Overhead ($9 200 MHrs.)
Total manufacturing cost
Plus 30% markup
Bid price
2.

Purchasing rate
Setup cost rate
Engineering rate
Other cost rate

= $30,000/5,000
= $15,000/1,000
= $20,000/500
= $25,000/10,000

Direct materials
Direct labor
Overhead:
Purchasing ($6 15); ($6 20)
Setups ($15 2); ($15 3)
Engineering ($40 25); ($40 10)
Other ($2.50 200); ($2.50 200)
Total manufacturing cost
Plus 30% markup
Bid price
3.

Job #2
$ 8,600
2,000
1,800
$12,400
3,720
$16,120

= $6 per purchase order

= $15 per setup
= $40 per engineering hour
= $2.50 per MHr
Job #1
$4,500
1,000

Job #2
$ 8,600
2,000

90
30
1,000
500
$7,120
2,136
$9,256

120
45
400
500
$11,665
3,500
$15,165

The activity-based approach to assigning overhead gives a more accurate

cost figure because so much of the overhead is non unit-level and there is
product diversity.

166

628
1. a. Materials ...............................................
Accounts Payable .........................

44,200

b. Work in Process ..................................

Materials ........................................

27,000

c. Work in Process ..................................

Wages Payable ..............................

28,200

d. Overhead Control ................................

Cash ...............................................

19,950

e. Work in Process ..................................

Overhead Control..........................

18,800

2.

44,200
27,000
28,200
19,950
18,800

Job #703
Beginning balance, Work in Process
Direct materials
Direct labor
Overhead applied
Total

$13,000
12,500
11,700
7,800
$45,000

Job #704
Direct materials
Direct labor
Overhead applied
Total

$14,500
16,500
11,000
$42,000

3. f. Finished Goods ...................................

Work in Process ............................

45,000

h. Cost of Goods Sold .............................

Finished Goods .............................

6,240

Accounts Receivable ..........................

Sales Revenue...............................

8,736

4.

a. Materials:
Beginning balance
Add: Purchases
Less: Materials requisitioned
Ending balance

45,000
6,240
8,736

$ 6,070
44,200
(27,000)
$ 23,270

167

628

Concluded

b. Work in Process:
Beginning balance
Add: Materials requisitioned
Direct labor
Overhead applied
Less: Jobs completed
Ending balance

$ 13,000
27,000
28,200
18,800
(45,000)
$ 42,000

c. Finished Goods:
Beginning balance
Add: Jobs completed
Less: Jobs sold
Ending balance

$ 6,240
45,000
(6,240)
$ 45,000

629
1. a. Materials ...............................................
Accounts Payable .........................

3,000

b. Work in Process ..................................

Materials ........................................

1,700

c. Work in Process [$8 (50 + 100)].......

1,200

3,000
1,700

Wages Payable ..............................

d. Work in Process ($7.50 150) ............

1,200
1,125

Overhead Control..........................

1,125

e. Overhead Control ................................

1,230
Cash ...............................................
1,230
2.
Job #443
Job #444
Direct materials
$ 500
Direct materials
$1,200
Direct labor
400
Direct labor
800
Applied overhead
375
Applied overhead
750
Total
$1,275
Total
$2,750
f. Finished Goods ...................................
Work in Process ............................

1,275

g. Cost of Goods Sold .............................

Finished Goods .............................

2,000

Accounts Receivable ..........................

Sales Revenue...............................

2,500

168

1,275
2,000
2,500

629
3.

Concluded
Kearney Company
Statement of Cost of Goods Manufactured
For the Month Ended April 30, 20XX

Direct materials:
Beginning materials inventory ......................
Purchases of materials ..................................
Total materials available ................................
Ending materials .............................................
Materials used .................................................
Direct labor ...........................................................
Overhead...............................................................
Less: Underapplied overhead .............................
Overhead applied .................................................
Current manufacturing costs ..............................
Add: Beginning work in process ........................
Total manufacturing costs ..................................
Less: Ending work in process ............................
Cost of goods manufactured ..............................

169

$1,400
3,000
$4,400
2,700
$1,700
1,200
$1,230
105
1,125
$4,025
0
$4,025
2,750
$1,275

630
Debroux Company
Assembly Department
Production Report
For the Month of February 20XX
(Weighted Average Method)
Unit Information
Units to account for:
Units in beginning WIP
Units started
Total units

Units accounted for:

12,000
28,000
40,000

Units completed
Units in ending WIP
Total units

Equivalent units:
Units completed
Units in ending WIP (5,400 70%)
Total equivalent units

34,600
3,780
38,380

Cost Information
Costs to account for:
Costs in beginning WIP
Costs added by department
Total costs to account for

$142,760
333,152
$475,912

Cost per equivalent unit ($475,912/38,380)

Costs accounted for:

Goods transferred out (34,600 $12.40)
Ending work in process (3,780 $12.40)
Total costs accounted for

$429,040
46,872
$475,912

170

12.40

34,600
5,400
40,000

631
Debroux Company
Assembly Department
Production Report
For the Month of February 20XX
(FIFO Method)
Unit Information
Units to account for:
Units in beginning WIP
Units started
Total units

12,000
28,000
40,000

Units accounted for:

Started and completed
From beginning WIP
From ending WIP
Total units

Equivalent units:
Started and completed
To complete beginning WIP (12,000 40%)
Units in ending WIP (5,400 70%)
Total equivalent units

22,600
4,800
3,780
31,180

Cost Information
Costs to account for:
Costs in beginning WIP
Costs added by department
Total costs to account for

$142,760
333,152
$475,912

Cost per equivalent unit ($333,152/31,180)

$10.6848

Costs accounted for:

Transferred out:
Units started and completed (22,600 $10.6848)
Units in beginning work in process:
From prior period
From current period (4,800 $10.6848)
Total cost transferred out
Goods in ending work in process (3,780 $10.6848)
Total costs accounted for

171

$241,476
142,760
51,287
$435,523
40,389
$475,912

22,600
12,000
5,400
40,000

632
1.

a. Physical flow schedule:

Units to account for:
Units in BWIP
Units started
Total units

Units accounted for:

Started and completed
From BWIP
From EWIP
Total units

20,000
510,000
530,000

480,000
20,000
30,000
530,000

b. Equivalent unit schedule:

Units completed
Units in ending WIP
Total equivalent units

Paraffin
500,000
30,000
530,000

Pigment
500,000
30,000
530,000

Pigment
$ 100,000
2,550,000
$2,650,000

Conversion
$ 40,000
5,170,000
$5,210,000

Conversion
500,000
21,000*
521,000

*(30,000 70%)
2.

Unit cost computation:

Costs in BWIP
Costs added
Total costs

Paraffin
$ 120,000
3,060,000
$3,180,000

Total
$ 260,000
10,780,000
$11,040,000

Unit cost = Unit paraffin cost + Unit pigment cost + Unit conversion cost
= ($3,180,000/530,000) + ($2,650,000/530,000) +
($5,210,000/521,000)
= $6 + $5 + $10 = $21
3. Ending work in process
= (30,000 $6) + (30,000 $5) + (21,000 $10)
= $180,000 + $150,000 + $210,000
= $540,000
Cost of goods transferred out: 500,000 $21 = $10,500,000
4.

Cost reconciliation:
Costs to account for:
Beginning WIP
August costs
Total to account for

260,000
10,780,000
$11,040,000

172

Costs accounted for:

Transferred out
Ending WIP
Total accounted for

$10,500,000
540,000
$11,040,000

633
Grace Sauces, Inc.
Mixing Department
Production Report
For the First Quarter 20XX
(FIFO Method)
Unit Information
Units to account for:
Units accounted for:
Units in beginning WIP
144,000
Units transferred out
Units started
180,000
Units in ending WIP
Units to account for
324,000
Units accounted for
* Started and completed = 148,500 + B-WIP 144,000 = 292,500

Units started and completed

Units in BWIP (to complete)
Units in EWIP
Total units accounted for

292,500*
31,500
324,000

Equivalent Units
Transferred In Materials Conversion
148,500
148,500
148,500

36,000
31,500
31,500
6,300
180,000
180,000
190,800
Cost Information

Costs to account for:

Transferred In Materials
Beginning WIP
$ 45,600
$ 6,432
Incurred during quarter
230,400
33,500
Total costs to account for
$276,000
$39,932
Equivalent units
Cost incurred during quarter
Equivalent units

180,000
$

1.28

180,000

190,800

$ 0.1861

$ 0.3807

$ 1.8468

EWIP

Total
$274,250

Costs accounted for:

Transferred Out
Started/complete (148,500 $1.8468)
$274,250
Units in beginning WIP:
From prior period
66,432
Current period (36,000 $0.3807)
13,705
Units in ending WIP:
Transferred in (31,500 $1.28)

Materials (31,500 $0.1861)

Conversion (6,300 $0.3807)

Total costs accounted for

$354,387
*Difference due to rounding.

173

Conversion
Total
$ 14,400
$ 66,432
72,640
336,540
$ 87,040
$402,972

$40,320
5,862
2,398
$48,580

66,432
13,705
40,320
5,862
2,398
$402,967*

634
Grace Sauces, Inc.
Mixing Department
Production Report
For the First Quarter 20XX
(Weighted Average Method)
Unit Information
Units to account for:
Units in beginning WIP
Units started
Units to account for

Units accounted for:

Units transferred out
Units in ending WIP
Units accounted for

144,000
180,000
324,000

Units completed
Units in ending WIP
Total units accounted for

292,500
31,500
324,000

Equivalent Units
Transferred In Materials Conversion
292,500
292,500
292,500
31,500
31,500
6,300
324,000
324,000
298,800
Cost Information

Costs to account for:

Transferred In
Beginning WIP
$ 45,600
Incurred during quarter
230,400
Total costs to account for $276,000
Equivalent units
Cost per equivalent unit

324,000
$

0.852

Costs accounted for:

Goods transferred out
(292,500 $1.27)
Ending work in process:
Transferred in (31,500 $0.852)
Materials (31,500 $0.12)
Conversion (6,300 $0.291)
Total costs accounted for
*Difference due to rounding.

174

Materials
$ 6,432
33,500
$ 39,932
324,000
$

0.12

Transferred Out
$370,421

$370,421

Conversion
Total
$ 14,400
$ 66,432
72,640
336,540
$ 87,040
$402,972
298,800
$ 0.291
EWIP

$26,838
3,780
1,835
$32,453

1.27
Total

$370,421
26,838
3,780
1,835
$402,874*

635
1.

Department A
a. Physical flow schedule:
Units in beginning WIP
Units started in November
Total units to account for

5,000
25,000
30,000

Units completed and transferred out:

Started and completed
From beginning WIP
Units in ending WIP
Total units accounted for

23,000
5,000
2,000
30,000

Costs charged to the department:

Beginning WIP
Incurred during November
Total costs

Materials
$10,000
57,800
$67,800

Conversion
$ 6,900
95,220
$102,120

Total
$ 16,900
153,020
$169,920

b. Equivalent unit calculation:

Units completed
Add: Equivalent units in ending WIP
Total equivalent units

Materials
28,000
2,000
30,000

c. Unit cost calculation:

Unit cost = Unit material cost + Unit conversion cost
= $67,800/30,000 + $102,120/29,600
= $2.26 + $3.45
= $5.71

175

Conversion
28,000
1,600
29,600

635

Continued

d. and e. Cost reconciliation:

Total costs accounted for:
Goods transferred out (28,000 $5.71) ..................
Costs in ending WIP:
Materials (2,000 $2.26) .....................................
Conversion (1,600 $3.45) .................................
Total costs accounted for ..................................

$159,880
$4,520
5,520

Costs to account for:

Beginning work in process ................................
Costs incurred during November ......................
Total costs to account for ..................................

10,040
$169,920
$ 16,900
153,020
$169,920

2. Journal entries:
Work in ProcessDept. A .......................
Materials Inventory ..............................

57,800

Work in ProcessDept. A .......................

Conversion CostsDept. A ...............

95,220

Work in ProcessDept. B .......................

Work in ProcessDept. A ..................

159,880

57,800
95,220*
159,880

*When conversion costs are not broken into labor and overhead components,
a control account for conversion costs is used. Some firms now combine
overhead and direct labor costs into one category. This practice is developing because direct labor is becoming a small percentage of total manufacturing costs.

176

635
3.

Continued

Department B
a. Physical flow schedule:
Units in beginning WIP
Units started in November (transferred in)
Total units to account for

8,000
28,000
36,000

Units completed and transferred out:

Started and completed
From beginning WIP
Units in ending WIP
Total units accounted for

25,000
8,000
3,000
36,000

Costs charged to the department:

Beginning WIP
Incurred in Nov.
Total costs

Materials
$
0
37,950
$37,950

Conversion
$ 16,800
128,100
$144,900

Transferred
In
$ 45,320
159,880
$205,200

Total
$ 62,120
325,930
$388,050

b. Equivalent unit calculation:

Materials
Units completed
33,000
Add: Equivalent units in EWIP
0
Total equivalent units
33,000

Conversion
33,000
1,500
34,500

Transferred
In
33,000
3,000
36,000

c. Unit cost calculation:

Unit cost = Unit material cost + Unit conversion cost + Unit
transferred in cost
= ($37,950/33,000) + ($144,900/34,500) + ($205,200/36,000)
= $1.15 + $4.20 + $5.70
= $11.05

177

635

Concluded

d. and e. Cost reconciliation:

Total costs accounted for:
Goods transferred out (33,000 $11.05) ................
Costs in ending WIP:
Materials ...............................................................
Conversion (1,500 $4.20) .................................
Transferred in (3,000 $5.70) .............................
Total costs in ending WIP ........................................
Total costs accounted for ..................................

$364,650
$

0
6,300
17,100
23,400
$388,050

Costs to account for:

Beginning work in process ................................
Costs incurred during November ......................
Total costs to account for ..................................

$ 62,120
325,930
$388,050

Journal entries for Department B:

Work in ProcessDept. B ..................
Work in ProcessDept. A ...........

159,880

Work in ProcessDept. B ..................

Materials Inventory .......................

37,950

Work in ProcessDept. B ..................

Conversion CostsDept. B .........

128,100

Finished Goods ...................................

Work in ProcessDept. B ...........

364,650

159,880
37,950
128,100*
364,650

*Because conversion costs are not broken into labor and overhead components, a control account for conversion costs is used. Some firms are
now combining overhead and direct labor costs into one category. This
practice is developing because direct labor is becoming a small percentage of total manufacturing costs.

178

636
1.

Department A
a. Physical flow schedule:
Units in beginning WIP
Units started in November
Total units to account for

5,000
25,000
30,000

Units completed and transferred out:

Started and completed
From beginning WIP
Units in ending WIP
Total units accounted for

23,000
5,000
2,000
30,000

Costs charged to the department:

Materials
$10,000
57,800
$67,800

Beginning WIP
Incurred during November
Total costs

Conversion
$ 6,900
95,220
$102,120

Total
$ 16,900
153,020
$169,920

b. Equivalent unit calculation:

Units started and completed
Equivalent units in beginning WIP
Equivalent units in ending WIP
Total equivalent units

Materials
23,000

2,000
25,000

c. Unit cost calculation:

Unit cost = Unit material cost + Unit conversion cost
= ($57,800/25,000) + ($95,220/27,600)
= $2.312 + $3.45
= $5.762

179

Conversion
23,000
3,000
1,600
27,600

636

Continued

d. and e. Cost reconciliation:

Cost of units started and completed (23,000 $5.762)
Cost of units in beginning WIP:
Prior-period costs ...............................................
Current cost to finish units (3,000 $3.45) .......
Total cost of units transferred out ..........................
Costs in ending WIP:
Materials (2,000 $2.312) ...................................
Conversion (1,600 $3.45) .................................
Total costs in ending WIP ........................................
Total costs accounted for ..................................

$132,526
16,900
10,350
$159,776
$4,624
5,520
10,144
$169,920

Costs to account for:

Beginning WIP .....................................................
Costs incurred .....................................................
Total costs to account for ..................................

$ 16,900
153,020
$169,920

2. Journal entries:
Work in ProcessDept. A .......................
Materials Inventory ..............................

57,800

Work in ProcessDept. A .......................

Conversion CostsDept. A ...............

95,220

Work in ProcessDept. A .......................

Work in ProcessDept. A ..................

159,776

57,800
95,220*
159,776

*Because conversion costs are not broken into labor and overhead components, a control account for conversion costs is used. Some firms are
now combining overhead and direct labor costs into one category. This
practice is developing because direct labor is becoming a small percentage of total manufacturing costs.

180

636
3.

Continued

Department B
a. Physical flow schedule:
Units in beginning WIP
Units started in November (transferred in)
Total units to account for

8,000
28,000
36,000

Units completed and transferred out:

Started and completed
From beginning WIP
Units in ending WIP
Total units accounted for

25,000
8,000
3,000
36,000

Costs charged to the department:

Transferred
Materials
Beginning WIP
$
0
Incurred during Nov.
37,950
Total costs
$37,950

Conversion
$ 16,800
128,100
$144,900

In
$ 45,320
159,776
$205,096

Total
$ 62,120
325,826
$387,946

b. Equivalent unit calculation:

Materials
25,000
8,000
0
33,000

Units started and completed

Equivalent units in BWIP
Equivalent units in EWIP
Total equivalent units

Conversion
25,000
4,000
1,500
30,500

Transferred
In
25,000
0
3,000
28,000

c. Unit cost calculation:

Unit cost = Unit material cost + Unit conversion cost + Unit
transferred in cost
= $37,950/33,000 + $128,100/30,500 + $159,776/28,000
= $1.15 + $4.20 + $5.706
= $11.056

181

636

Concluded

d. and e. Cost reconciliation:

Cost of units started and completed (25,000 $11.056)
Cost of units in beginning WIP:
Prior-period costs ...............................................
Current cost to finish units:
Materials (8,000 $1.15) .....................................
Conversion (4,000 $4.20) .................................
Total costs of goods transferred out ......................
Costs in ending WIP:
Conversion (1,500 $4.20) .................................
$ 6,300
Transferred in (3,000 $5.706) ...........................
17,118
Total costs in ending WIP ........................................
Total costs accounted for ..................................
Costs to account for:
Beginning work in process ................................
Costs incurred during November ......................
Total costs to account for ..................................

$276,400
62,120
9,200
16,800
$364,520

23,418
$387,938*
$ 62,120
325,826
$387,946*

*Difference due to rounding.

Journal entries for Department B:
Work in ProcessDept. B ..................
Work in ProcessDept. A ...........

159,776

Work in ProcessDept. B ..................

Materials Inventory .......................

37,950

Work in ProcessDept. B ..................

Conversion CostsDept. B ........

128,100

Finished Goods ...................................

Work in ProcessDept. B ...........

364,520

159,776
37,950
128,100*
364,520

*As before, a control account for conversion cost is used to combine overhead and direct labor cost into one category.

182

637
1.

a. Molding
Units to account for:
Beginning WIP
Started

500
1,000
1,500

Units accounted for:

Transferred out
Ending WIP

1,300
200
1,500

b. Assembly
Units to account for:
Beginning WIP
Started

0
1,300
1,300

Units accounted for:

Transferred out
Ending WIP

900
400
1,300

c. Packaging
Units to account for:
Beginning WIP
Started

2.

150
900
1,050

Units accounted for:

Transferred out
Ending WIP

1,050
0
1,050

Equivalent units:

Trans. out
EWIP

Molding
Mat. Conv.
1,300 1,300
200
40
1,500 1,340

3.
Unit prior department cost
Unit materials cost
Unit conversion cost
Total unit cost

Assembly
Tr. In
Mat. Conv.
900
900
900
400
160
160
1,300 1,060 1,060
Molding

$ 5.00
6.50
$11.50

Assembly
$11.50
0.46
1.10
$13.06

Molding:
Unit materials cost:
($2,500 + $5,000)/1,500 = $5.00
Unit conversion cost: ($1,050 + $7,660)/1,340 = $6.50

183

Packaging
Tr. In
Mat. Conv.
1,050 1,050 1,050
0
0
0
1,050 1,050 1,050
Packaging
$13.06
2.65
3.05
$18.76

637

Concluded

Assembly:
Unit transferred-in cost: (0 + $14,950)/1,300 = $11.50
Unit materials cost:
(0 + $487.60)/1,060 = $0.46
Unit conversion cost:
(0 + $1,166)/1,060 = $1.10
Packaging:
Unit transferred-in cost: ($1,959 + $11,754)/1,050 = $13.06
Unit materials cost:
($375 + $2,407.50)/1,050 = $2.65
Unit conversion cost:
($225 + $2,977.50)/1,050 = $3.05
4.

Molding:
Transferred out: (1,300 $11.50) = $14,950
Ending WIP:
(200 $5) + (40 $6.50) = $1,260
Assembly:
Transferred out: (900 $13.06) = $11,754
Ending WIP:
(400 $11.50) + (160 $1.56) = $4,849.60
Packaging:
Transferred out: (1,050 $18.76) = $19,698
Ending WIP:
0

5.

Costs to account for:

Molding
Assembly
Packaging
Costs accounted for:
Molding
Assembly
Packaging

BWIP
$3,550.00
0.00
2,559.00

Current
$12,660.00
16,603.60
17,139.00

Total
$16,210.00
16,603.60
19,698.00

Trans. Out
$14,950.00
11,754.00
19,698.00

EWIP
$1,260.00
4,849.60
0.00

Total
$16,210.00
16,603.60
19,698.00

184

638
1.

Equivalent units:
Molding
Mat. Conv.

Started and
completed
BWIP
EWIP

2.

3.

800
0
200
1,000

800
350
40
1,190

Assembly
Tr. In
Mat. Conv.
900
0
400
1,300

Molding:
Unit materials cost:
Unit conversion cost:
Total unit cost

900
0
160
1,060

Packaging
Tr. In
Mat. Conv.

900
0
160
1,060

900
0
0
900

$5,000/1,000
$7,660/1,190

=
=

$ 5.000
6.437
$11.437

Assembly:
Unit transferred-in cost:
Unit materials cost:
Unit conversion cost:
Total unit cost

$14,950/1,300
$487.60/1,060
$1,166/1,060

=
=
=

$11.500
0.460
1.100
$13.060

Packaging:
Unit transferred-in cost:
Unit materials cost:
Unit conversion cost:
Total unit cost

$11,754/900
$2,407.50/900
$2,977.50/975

=
=
=

$13.060
2.675
3.054
$18.789

Molding:
Transferred out:
Started and completed (800 $11.437)
Prior-period cost
Complete beginning WIP (350 $6.437)
Total transferred out
Ending WIP: (200 $5) + (40 $6.437)

185

$ 9,149.60
3,550.00
2,252.95
$ 14,952.55
$ 1,257.48

900
0
0
900

900
75
0
975

638

Concluded

Assembly:
Transferred out:
Started and completed (900 $13.06)
Prior-period cost
Complete beginning WIP
Total transferred out

$ 11,754.00
0.00
0.00
$ 11,754.00

Ending WIP: (400 $11.50) + (160 $1.56)

Packaging:
Transferred out:
Started and completed (900 $18.789)
Prior period cost
Complete beginning WIP (75 $3.054)
Total transferred out

$ 16,910.10
2,559.00
229.05
$ 19,698.15

Ending WIP:
4.

$ 4,849.60

Cost reconciliation:
Costs to account for:
Molding
Assembly
Packaging

BWIP
$3,550.00
0.00
2,559.00

Current
$12,660.00
16,603.60
17,139.00

Total
$16,210.00
16,603.60
19,698.00

Trans. Out
$14,952.55
11,754.00
19,698.15

EWIP
$1,257.48
4,849.60
0.00

Total
$16,210.03*
16,603.60
19,698.15*

Costs accounted for:

Molding
Assembly
Packaging

*Difference due to rounding.

186

MANAGERIAL DECISION CASES

639
1.

Garys proposal requires Donna to falsify the equivalent unit calculation so

that income and assets can be inflated and reported incorrectly. Falsification
of the production report would be a violation of at least two major ethical
standards: integrity and objectivity. Falsification does not allow the organization to attain its legitimate and ethical objectives. Moreover, if Donna agrees
to the proposal, she would be taking action that would discredit her profession. Finally, Donna has an ethical obligation to communicate information
fairly and objectively, disclosing all information that would be needed for the
loan officer to fairly assess the merits of the companys request for a loan.
Clearly, Donna should not agree to falsify the production report.

2.

Donna has an obligation to report Gary to a superior only if an actual ethical

problem exists. If Gary decides that the course of action he is suggesting is
not really in his or the companys best interests, then no ethical problem exists, and no action by Donna is needed.

3.

If Gary insists on his idea of falsification of the divisions reports, Donna

should attempt to resolve the conflict by appealing to Garys immediate supervisor (and on up, if necessary, until a satisfactory resolution is achieved).
If no satisfactory resolution is possible, then Donna should resign and submit an informative memo to a representative of the organization.

4.

In this situation, the ethical dilemma is complicated by two factors: Donnas

age and a low likelihood of resolution by appealing to higher-level authorities.
Donnas age may make it more difficult to find alternative employment (at
least at the same level and pay), and it may mean possible forfeiture of retirement benefits. Many students will likely respond that Donna should still
resign (assuming that resolution is not likely), recommending the ideal outcome. While Donnas ultimate resignation is the right choice if resolution
fails, students should realize that ethical behavior may often carry with it
some very significant personal sacrifices. It could be argued, however, that
the costs of unethical behavior are even greater.
Another possibility is to encourage Donna to see a lawyer. She has the option
of fighting back, and at her age (with retirement benefits at stake), a good offense may be her best defense.

187

RESEARCH ASSIGNMENT

640
Answers will vary.

641
Answers will vary.

188