Chapter 4 Process Costing

Which of the following products or services would most likely use a process cost accounting system?

--A run of 5,000 one-liter bottles of purified water are very likely to require the same amount of materials, labor, and overhead for each product. The beverage company would most likely use a process cost accounting system, which assumes each product contains the same amount of materials, labor, and overhead. A run of 5,000 one-liter bottles of purified water at a beverage company

On August 1, Mega Manufacturing's Fabrication Department had 24,000 units in Beginning Work-in-Process that were 60% complete. Between August 1 and August 31, the department transferred a number of completed units to the Packaging Department. At the end of the month, on August 31, the Fabrication Department had 60,000 units in Work-in-Process that were 80% complete. Materials are added at the beginning of the process, while conversion costs are incurred uniformly throughout the process. If the Fabrication Department had 190,000 equivalent units of production for materials for August, how many completed units did it transfer to the Packaging Department? Mega uses the FIFO method.

--Because materials are added at the beginning of the production process, units in Beginning Work-in-Process are already 100% complete for materials. Also, for the same reason, Ending Work-in-Process is 100% complete for materials. Therefore, units transferred out to the Packaging Department can be calculated as follows: Units transferred out = 190,000 (started during the period) − 60,000 (units in Ending Work-in-Process) + 24,000 (units in Beginning Work-in-Process) = 154,000. 154,000 units.

How are the unit costs computed in a process cost system?

--In a process cost system, each equivalent unit requires the same amount of materials, labor, and overhead; therefore, unit costs are computed by dividing the total manufacturing costs for the period by the equivalent number of units produced in the period. Total manufacturing costs for the period are divided by the equivalent number of units produced in the period.

Pinnacle Industries' Fabrication Department had the following data for September: Work-in-Process, September 1110,000 unitsCompleted and transferred out250,000 unitsWork-in-Process, September 30100,000 units Pinnacle adds materials at the beginning of the fabrication process, and, with respect to conversion costs, the Beginning Work-in-Process is 40%, while the Ending Work-in-Process is 75% complete. Using the FIFO method, what is the department's total number of equivalent units for materials in September?

Because materials are added at the beginning of the production process, units in Beginning Work-in-Process are already 100% complete for materials. Also, for the same reason, Ending Work-in-Process is 100% complete for materials. Therefore, equivalent number of units for materials can be calculated as follows: Equivalent number of units for materials = 250,000 (completed and transferred) − 110,000 (units in Beginning Work-in-Process) + 100,000 (units in Ending Work-in-Process) = 240,000. 240,000 equivalent units.

On July 1, Premiere Paints' Mixing Department had 80,000 units in Beginning Work-in-Process that were 80% complete. Between July 1 and July 31, the department transferred 150,000 units to the Packaging Department. At the end of the month, on July 31, the Mixing Department had 40,000 units in Work-in-Process that were 80% complete. Materials are added at the beginning of the process, while conversion costs are incurred uniformly throughout the process. For July, using the FIFO method, the Mixing Department's equivalent units of production for conversion costs were:

Correct. Equivalent units of production calculated using the FIFO method equals equivalent units of Beginning Work-in-Process plus units started and completed plus equivalent units of Ending Work-in-Process. See the following worksheet for the calculation of Premiere's equivalent units of production for conversion costs in Mixing using the FIFO method. Premiere Paints (FIFO) Physical Units% Done in PeriodConversion Costs Beginning Work-in-Process80,0002016,000 Started and Completed70,00010070,000 Ending Work-in-Process40,0008032,000 Equivalent Units in Period118,000 (Note: 70,000 units started and completed = 150,000 units completed − 80,000 units in beginning Work-in-Process.) 118,000 units.

In the month of June, a department had 20,000 units in Beginning Work-in-Process that were 70% complete. During June, 90,000 units were transferred into production from another department. At the end of June there were 10,000 units in Ending Work-in-Process that were 40% complete. Materials are added at the beginning of the process, while conversion costs are incurred uniformly throughout the process. Using the Weighted Average method, the equivalent units of production for materials in June were:

Correct. The number of units transferred out must first be calculated. Units to account for (Beginning Work-in-Process plus units transferred in) must equal units accounted for (units transferred out plus Ending Work-in-Process), so the units transferred out can be calculated as follows: 20,000 + 90,000 = units transferred out + 10,000. Units transferred out = 110,000 − 10,000 = 100,000 units. Under the Weighted Average method, the formula to calculate the equivalent units of production for materials equals the number of units transferred out plus the Ending Work-in-Process multiplied by the percent complete. Since materials are added at the beginning of the process, the Ending Work-in-Process is 100% complete in regard to materials; therefore, the equivalent units of production equals 110,000 (100,000 + (10,000 × 100%)). 110,000 equivalent units.

A company is using process costing (with first-in first-out [FIFO]) and all costs are added evenly throughout the manufacturing process. If there are 5,000 units in beginning work-in-process (WIP) inventory (30% complete), 10,000 units in ending WIP inventory (60% complete), and 25,000 units started in process this period, how many equivalent units are there for this period?

Using FIFO, we need to consider the number of units started and completed (25,000 − 10,000) and adjust for equivalent units in both beginning and ending WIP inventory. 70% of beginning WIP inventory are completed in the period (5,000 × 0.7 = 3,500) and 60% of ending WIP inventory are completed in the period (10,000 × 0.6 = 6,000). The sum of 24,500 (15,000 + 3,500 + 6,000) represents the equivalent units for the period. 24,500 units.

A vintage car restoration company using job order costing determines that all cars currently in production need rework done on their paint primer due to impurities that were in the air at the time of spraying. The firm has determined that nothing can be done to prevent such an incident from occurring occasionally. Which of the following is true of this type of rework?

--Because this situation occurs occasionally and the company knows about it, it is considered a normal defective unit. Since the car company uses job order costing, each car is considered a specific job, so these impurities are common to all jobs and therefore should be charged to factory overhead. These are normal defective units common to all jobs, so the expense is charged to factory overhead.

Wilson Tech's production cost data for the current period is: Beginning Work-in-Process0 unitsUnits Started16,000 unitsUnits Transferred Out9,800 unitsEnding Work-in-Process6,200 units Materials are entered at the beginning of the process. The Ending Work-in-Process units are 40% complete as to conversion costs. Using the FIFO method, what are the equivalent units of production for conversion costs?

--Equivalent units of production = Number of units transferred out + Number of units in Ending Work-in-Process × Percent completed; therefore, the equivalent units of production equal 12,280 (9,800 + (6,200 × 40%)). 12,280 units.

The following information was gathered for the current period of manufacturing production for a firm: DMCCTotal Beginning WIP$ 14,000$ 15,000$ 29,000 Current Period Costs$240,000$200,000$440,000 Total costs$254,000$215,000$469,000 There were 100 units in beginning work-in-process (WIP), which were 30% complete in direct materials (DM) and 40% complete in conversion costs (CC). During the period 2,000 units were started in production and 1,900 were completed. Ending WIP inventory was 70% complete in DM and 60% complete in CC. If the firm uses the weighted-average inventory method, what are equivalent units for the period?

--First compute the number of units in ending inventory = 100 + 2,000 − 1,900 = 200 units. Weighted average EU = number of units completed plus the EU in ending WIP inventory. For DM: 1,900 + (200 × 0.7) = 2,040; For CC: 1,900 + (200 × 0.6) = 2,020. DM: 2,040 units; CC: 2,020 units.

A firm has three processes in its manufacturing plant: processes 1, 2, and 3. Assume you are computing equivalent units for process 2 and find the following data: Beginning work-in-process (WIP): 5,000 units (30% complete for conversion cost [CC]) Units started during period: 93,000 units Ending WIP: 8,000 units (20% complete for CC) All direct materials (DM) are added at the beginning of the process and CC are added evenly throughout production. The firm uses the first-in, first-out (FIFO) method for its inventory. What are the equivalent units for this period (broken down into categories of transferred-in, DM, and CC, respectively)?

--Given the information, one can find the number of units started and completed as 93,000 − 8,000 = 85,000 units. Since DM is added at the beginning of the process, all units that enter the process are 100% complete in DM costs (and transferred-in costs): [(0% × 5,000 beginning WIP) + 85,000 started and completed + (100% × 8,000 ending WIP)] = 93,000 units. To find conversion cost EU: (5,000 × 70%) + 85,000 + (8,000 × 20%) = 90,100 units. 93,000; 93,000; 90,100.

A characteristic of products that use a process cost accounting system and are mass produced in a continuous fashion is:

--Process cost accounting assumes each unit requires the same amount of material, labor, and overhead; therefore, this is characteristic of products that are mass-produced in a continuous fashion. The products require identical amounts of materials, labor, and overhead.

This month, the Roasting Department of Java Coffee Company completed and transferred out 75,000 one-pound bags of coffee. The department also had 25,000 units that were 80% complete with respect to conversion costs and no Beginning Work-in-Process. Using the FIFO method, how many equivalent units of production for conversion costs does the department have for the month?

--Since there is no beginning Work-in-Process Inventory, the equivalent units of output equal units transferred out plus the equivalent units in Ending Work-in-Process; therefore, the equivalent units of production equals 95,000 (75,000 + (25,000 × 80%)). 95,000

A company is using process costing with weighted-average inventory valuation and all costs are added evenly throughout the manufacturing process. For a period with 5,000 units in beginning work-in-process (WIP) inventory (30% complete), 10,000 units in ending WIP inventory (60% complete), and 25,000 units started in process, how many equivalent units are there for this period?

--The weighted-average method assumes that all units and costs are current, i.e. there is no beginning inventory; therefore, the Equivalent Units for Conversion Cost = (Units Completed) + (Units in Ending Inventory) × (% Complete). Since there were 5,000 units in beginning WIP plus 25,000 started in process, there are 30,000 units to be accounted for. Of those 30,000 units, 10,000 are in ending WIP inventory; therefore, 20,000 units must have been completed during the period plus 60% of the remaining 10,000 units which equals 6,000 units in the ending WIP inventory. Therefore, the equivalent units for this period is 26,000 units. 26,000 units.

On July 1, Premiere Paints' Mixing Department had 80,000 units in Beginning Work-in-Process that were 65% complete. Between July 1 and July 31, the Mixing Department transferred 150,000 units to the Packaging Department. At the end of the month, on July 31, the Mixing Department had 40,000 units in Work-in-Process that were 80% complete. Materials are added at the beginning of the process, while conversion costs are incurred uniformly throughout the process. Premiere Paints uses the FIFO method. Based on this information, which of the following statements is accurate?

--Units transferred to the Packaging Department include the 80,000 units in Beginning Work-in-Process. Because materials are added at the beginning of the process, the 80,000 units in Beginning Work-in-Process should not be included in the calculation of equivalent units of production for materials. However, for the same reason, the units in Ending Work-in-Process should be considered. See the following calculation: 150,000 (transferred out) − 80,000 (units in beginning inventory) + 40,000 (units in ending inventory) In July, the Mixing Department had 110,000 equivalent units of production for materials.

Jones Corporation uses a first-in, first-out (FIFO) process costing system. Jones has the following unit information for the month of August: UnitsBeginning work-in-process inventory, 100% complete for materials, 75% complete for conversion cost 10,000 Units complete and transferred out 90,000 Ending work-in-process inventory, 100% complete for materials, 60% complete for conversion costs8,000 The number of equivalent units of production for conversion costs for the month of August is:

FIFO follows the actual flow of the units through the process. Therefore, the equivalent units of production used to calculate conversion costs for August can be calculated as: Equivalent units, conversion costs = (units in beginning inventory) × (1 − the completion rate at the beginning of the period) + (units started and finished) + (units in ending inventory) × (completion %) Equivalent units, conversion costs = (10,000 units)×(1 − 0.75) + (80,000 units) + (8,000 units) × (0.6) Equivalent units, conversion costs = 2,500 + 80,000 + 4,800 = 87,300. 87,300

During December, Krause Chemical Company had the following selected data concerning the manufacture of Xyzine, an industrial cleaner: Production FlowPhysical UnitsCompleted and transferred to the next departmentAdd:Ending work-in-process inventory10(40% complete as to conversion)Total units to account for110Less:Beginning work-in-process inventory20(60% complete as to conversion)Units started during December90 All material is added at the beginning of processing in this department, and conversion costs are added uniformly during the process. The beginning work-in-process inventory had $120 of raw material and $180 of conversion costs incurred. Material added during December was $540 and conversion costs of $1,484 were incurred. Krause uses the first-in, first-out (FIFO) process-costing method. The equivalent units of production used to calculate conversion costs for December was:

FIFO follows the actual flow of the units through the process. Therefore, the equivalent units of production used to calculate conversion costs for December can be calculated as: Equivalent units, conversion costs = (units in beginning inventory)×(1 − the completion rate at the beginning of the period) + (units started and finished) + (units in ending inventory) × (completion %) Equivalent units, conversion costs = (20 units) × (1 − 0.6) + (80 units) + (10 units) × (0.4) Equivalent units, conversion costs = 8 units + 80 units + 4 units = 92 units. 92 units.

A sporting goods manufacturer buys wood as a direct material for baseball bats. The Forming Department processes the baseball bats, and the bats are then transferred to the Finishing Department where a sealant is applied. The Forming Department began manufacturing 10,000 "Casey Sluggers" during the month of May. There was no beginning inventory. Costs for the Forming Department for the month of May were as: Direct materials$33,000 Conversion costs17,000 Total$50,000 A total of 8,000 bats were completed and transferred to the Finishing Department; the remaining 2,000 bats were still in the forming process at the end of the month. All of the Forming Department's direct materials were placed in process but, on average, only 25% of the conversion cost was applied to the ending work-in-process inventory. The cost of the units transferred to the Finishing Department is:

In a process costing system, costs may be added to a product at different points in the manufacturing process. In this scenario, all of the direct material costs have been placed in process for the 10,000 units that the Forming Department began manufacturing during the month. Regarding the conversion costs (conversion costs = direct labor + manufacturing overhead) , all conversion costs were applied to 8,000 units, but only 25% of the conversion costs have been applied to the 2,000 units in ending work-in-process inventory. The cost of the units transferred to the Finishing Department is calculated by taking the number of units that were transferred out and multiplying that number by the total manufacturing cost per unit. Cost of units transferred out = (units transferred out) × (manufacturing cost per unit) Number of units transferred to Finishing Department = 8,000 units Manufacturing cost per unit = direct material cost applied per unit + conversion cost applied per unit Direct material costs applied per unit = $33,000 ÷ 10,000 units = $3.30 per unit (Note that direct material costs are related to all 10,000 units, so that number must be used as the denominator.) Conversion costs applied during the period totaled $17,000 and they were applied in full to the 8,000 units that were transferred out, as well as 25% applied to the units remaining in process (2000 units × 0.25 = 500 equivalent units). Conversion costs per unit = ($17,000) ÷ (8,000 units + 500 units) = $17,000 ÷ 8,500 units = $2.00 per unit Cost of units transferred out = (units transferred out) × (manufacturing cost per unit) Cost of units transferred out = (8,000) × ($3.30 + $2.00) = (8,000) × ($5.30) = $42,400 $42,400.

The Cutting Department at the Blanc Company had 4,000 units in Beginning Work-in-Process, 9,000 units transferred out, and 2,000 units in Ending Work-in-Process. How many units were started by Blanc during the month?

In process costing, units to account for (Beginning Work-in-Process + Units started) equals units accounted for (Units transferred out + Ending Work-in-Process). Units accounted for equals 11,000 (9,000 + 2,000); therefore, units started is calculated as follows: Units started + 4,000 = 11,000 Units started = 11,000 − 4,000 = 7,000 7,000

A department adds raw materials to a process at the beginning of the process and incurs conversion costs uniformly throughout the process. For the month of January, there were 10,000 units in the Beginning Work-in-Process Inventory that were 80% complete; 90,000 units started into production in January; and 20,000 units that were 40% complete in the Ending Work-in-Process Inventory at the end of January. Using the FIFO method, what were the equivalent units of production for materials for the month of January?

Remember that this question is asking for the equivalent units of production for materials for the month of January. Materials are added to the production process at the beginning. Therefore, the 10,000 units in the Beginning Work-in-Process Inventory already had all materials added last month and no more will be added this month. Similarly, the 20,000 units in the Ending Work-in-Process Inventory had all materials added at the beginning of the process this month. Equivalent units are calculated as follows: Sutton Enterprises (FIFO) Physical Units% Done in Jan.Equivalent Units Beginning work-in-process10,0000%0 Started and completed70,000100%70,000 Ending work-in-process20,000100%20,000 Equivalent units in January90,000 (Note: 70,000 units started and completed = 90,000 units started − 20,000 units in ending work-in-process.) 90,000 equivalent units

Sutton Enterprises makes gadgets using a two-step process that involves machining first and assembly second. Sutton adds all direct materials at the beginning of the production process. Conversion occurs uniformly throughout the process. During the period, the Assembly Department completed 10,200 gadgets and transferred them out. Of the 10,200 gadgets completed, 2,000 were 70% complete at the beginning of the period. In addition, Sutton had 2,600 units in process that were 65% complete at the end of the period. Using the FIFO method, what are the equivalent units of production for conversion costs in Assembly?

See below for the calculation of equivalent units of production for conversion costs in Assembly using the FIFO method. Sutton Enterprises (FIFO) Physical Units% Done in PeriodConversion Costs Beginning work-in-process2,00030%600 Started and completed8,200100%8,200 Ending work-in-process2,60065%1,690 Equivalent units in period10,490 (Note: 8,200 units started and completed = 10,200 units completed − 2,000 units in beginning work-in-process.) 10,490 gadgets

Kimbeth Manufacturing uses a process cost system to manufacture dust density sensors for the mining industry. The following information pertains to operations for the month of May. UnitsBeginning work-in-process inventory, May 116,000Started in production during May100,000Completed production during May92,000Ending work-in-process inventory, May 3124,000 The beginning inventory was 60% complete for materials and 20% complete for conversion costs. The ending inventory was 90% complete for materials and 40% complete for conversion costs. Costs pertaining to the month of May are: Beginning inventory costs are: materials, $54,560; direct labor, $20,320; and factory overhead, $15,240. Costs incurred during May are: materials used, $468,000; direct labor, $182,880; and factory overhead, $391,160. Using the first-in, first-out (FIFO) method, the equivalent unit cost of materials for May is:

The FIFO approach follows the production flow and assumes that units will be sold in the order in which they were placed in inventory. In order to compute the cost per equivalent unit for materials, it is first necessary to calculate the number of equivalent units with respect to materials. To calculate the equivalent units of production for materials using FIFO, calculate the equivalent units for materials for: units in beginning inventory, products started into production during the month, and, units in ending inventory. First, the 16,000 units in the beginning inventory would be completed, requiring the addition of 6,400 [(16,000) × (1 − 0.6)] equivalent units for materials. Next, of the 100,000 units started during the month, 76,000 would be completed, requiring 76,000 equivalent units for materials. (92,000 units completed during month − 16,000 units from beginning inventory = 76,000 units) Lastly, of the 100,000 units started, 24,000 would be in the ending inventory, 90% complete with respect to materials, requiring 21,600 [(0.90) × (24,000)] equivalent units for materials. The total equivalent units for materials would be 6,400 + 76,000 + 21,600 = 104,000. The cost of materials used is $468,000. Therefore, the equivalent unit cost for materials = ($468,000 material cost) ÷ (104,000 equivalent units for materials) = $4.50 per unit 4.50

Kimbeth Manufacturing uses a process cost system to manufacture dust density sensors for the mining industry. The following information pertains to operations for the month of May. UnitsBeginning work-in-process inventory, May 116,000Started in production during May100,000Completed production during May92,000Ending work-in-process inventory, May 3124,000 The beginning inventory was 60% complete for materials and 20% complete for conversion costs. The ending inventory was 90% complete for materials and 40% complete for conversion costs. Costs pertaining to the month of May are: Beginning inventory costs are: materials, $54,560; direct labor, $20,320; and factory overhead, $15,240. Costs incurred during May are: materials used, $468,000; direct labor, $182,880; and factory overhead, $391,160. Using the first-in, first-out (FIFO) method, the equivalent units of production for materials are:

The FIFO approach follows the production flow and assumes that units will be sold in the order in which they were placed in inventory. To calculate the equivalent units of production for materials using FIFO, calculate the equivalent units for materials for: units in beginning inventory, products started into production during the month, and, units in ending inventory. First, the 16,000 units in the beginning inventory would be completed, requiring the addition of 6,400 [(16,000) × (1 - 0.6)] equivalent units for materials. Next, of the 100,000 units started during the month, 76,000 would be completed, requiring 76,000 equivalent units for materials. (92,000 units completed during month − 16,000 units from beginning inventory = 76,000 units) Lastly, of the 100,000 units started, 24,000 would be in the ending inventory, 90% complete with respect to materials, requiring 21,600 [(0.90) × (24,000)] equivalent units for materials. Therefore, the total equivalent units for materials would be 6,400 + 76,000 + 21,600 = 104,000. 104,000

Oster Manufacturing uses a weighted-average process costing system and has the following costs and activity during October: Materials$40,000 Conversion cost32,500 Total beginning work-in-process inventory$72,500 Materials$700,000 Conversion cost617,500 Total production costs - October, $1,317,500 Production completed, 60,000 units Work-in-process, October 31, 20,000 units All materials are introduced at the start of the manufacturing process, and conversion cost is incurred uniformly throughout production. Conversations with plant personnel reveal that, on average, month-end in-process inventory is 25% complete. Assuming no spoilage, how should Oster's October manufacturing cost be assigned?

The cost of the units completed is calculated as: Cost of units completed = (number of units) × (total cost per equivalent unit) Cost of units completed = (60,000 units) × (total cost per equivalent unit) Because all materials are introduced at the start of the manufacturing process, the equivalent units of material for October consists of the completed units and the work-in-process units. The equivalent units of material for October = (Completed production units) + (Work-in-process units) = 60,000 + 20,000 = 80,000. The equivalent units for conversion are calculated by adding together the units that were started and finished to the equivalent units that were in work-in-process inventory. Equivalent units for conversion = (units started and finished) + (% complete for conversion) × (ending work-in-process inventory) Equivalent units for conversion = (60,000) + (0.25) × (20,000) = 65,000 equivalent units for conversion. Cost per equivalent unit for materials = ($40,000 + $700,000) ÷ 80,000 equivalent units Cost per equivalent unit for materials = $740,000 ÷ 80,000 equivalent units = $9.25 Cost per equivalent unit for conversion = ($32,500 + $617,500) ÷ 65,000 equivalent units Cost per equivalent unit for conversion = $650,000 ÷ 65,000 equivalent units = $10 Total cost per equivalent unit = ($9.25 + $10) = $19.25 The cost of the 60,000 units completed would be calculated as: Cost of units completed = (60,000 units) × ($19.25) = $1,155,000 Cost of the ending inventory = (equivalent units for materials)×(materials cost per equivalent unit) + (equivalent units for conversion costs) × (conversion cost per equivalent unit) Cost of the ending inventory = (20,000 equivalent units for materials) × ($9.25 per unit) + (5,000 equivalent units for conversion) × ($10 per unit) = $235,000. Production Completed = $1,155,0

Waller Co. uses a weighted-average process-costing system. Material B is added at two different points in the production of shirts, 40% is added when the units are 20% completed, and the remaining 60% of Material B is added when the units are 80% completed. At the end of the quarter, there are 22,000 shirts in process, all of which are 50% completed. With respect to Material B, the ending shirts in process represent how many equivalent units?

The ending inventory of 22,000 shirts is only 50% complete. Therefore, the inventory units have only 40% of the Material B. This equates to 8,800 equivalent units, which is calculated by multiplying the number of units in ending inventory (22,000) by the percent of Material B (40%). Equivalent units, shirts = (22,000 units) × (0.4) = 8,800 units. 8,800

During December, Krause Chemical Company had the selected data concerning the manufacture of Xyzine, an industrial cleaner: Production Flow Physical Units Completed and transferred to the next department Add:Ending work-in-process inventory 10(40% complete as to conversion) Total units to account for110 Less:Beginning work-in-process inventory 20(60% complete as to conversion) Units started during December90 All material is added at the beginning of processing in this department, and conversion costs are added uniformly during the process. The beginning work-in-process (WIP) inventory had $120 of raw material and $180 of conversion costs incurred. Material added during December was $540 and conversion costs of $1,484 were incurred. Krause uses the weighted-average process-costing method. The total raw material costs in the ending WIP inventory for December is:

The total raw material cost in the ending inventory is calculated by taking the equivalent units of raw material in the ending inventory and multiplying it by the raw material costs per equivalent unit. Total raw material cost, ending inventory = (equivalent units, raw material ending inventory)×(raw material costs per equivalent unit) The weighted-average method assumes that all units and costs are current (i.e., there is no beginning inventory). Therefore, 110 equivalent units of raw material are required to yield a transfer-out of 100 units and 10 units in the ending inventory. Raw material cost per equivalent unit = (total material cost) ÷ (equivalent units) Raw material cost per equivalent unit = ($120 + $540) ÷ (110 equivalent units) Raw material cost per equivalent unit = $660 ÷ 110 units = $6 per unit Therefore, the total raw material cost, ending inventory = (10 equivalent units) × ($6 per unit) = $60. 60

Kimbeth Manufacturing uses a process cost system to manufacture dust density sensors for the mining industry. The following information pertains to operations for the month of May. Units Beginning work-in-process inventory, May 116,000 Started in production during May100,000 Completed production during May92,000 Ending work-in-process inventory, May 3124,000 The beginning inventory was 60% complete for materials and 20% complete for conversion costs. The ending inventory was 90% complete for materials and 40% complete for conversion costs. Costs pertaining to the month of May are: Beginning inventory costs are: materials, $54,560; direct labor, $20,320; and factory overhead, $15,240. Costs incurred during May are: materials used, $468,000; direct labor, $182,880; and factory overhead, $391,160. Using the weighted-average method, the equivalent unit conversion cost for May is:

The weighted-average method assumes that there is no beginning inventory. In other words, all units are started in the current period and all costs are incurred in the current period. Therefore, the assumption is that 116,000 units were added in the period, of which 92,000 were completed and 24,000 are in the ending inventory. The 24,000 units in ending inventory are 40% complete with respect to conversion costs. The equivalent units for conversion costs = (units completed during the period) + (equivalent units in ending inventory) Equivalent units for conversion costs = 92,000 + 0.4 × (24,000) = 101,600 Total conversion costs for the period = $182,880 + $20,320 + $391,160 + $15,240 Total conversion costs for the period = $609,600 Equivalent unit cost for conversion = (total conversion costs for the period) ÷ (total equivalent units for conversion costs) Equivalent unit cost for conversion = ($609,600) ÷ (101,600) = $6.00. 6.00

Kimbeth Manufacturing uses a process cost system to manufacture dust density sensors for the mining industry. The following information pertains to operations for the month of May. Units Beginning work-in-process inventory, May 1, - 16,000 Started in production during May - 100,000 Completed production during May - 92,000 Ending work-in-process inventory, May 31, - 24,000 The beginning inventory was 60% complete for materials and 20% complete for conversion costs. The ending inventory was 90% complete for materials and 40% complete for conversion costs. Costs pertaining to the month of May are as follows: Beginning inventory costs are: materials, $54,560; direct labor, $20,320; and factory overhead, $15,240. Costs incurred during May are: materials used, $468,000; direct labor, $182,880; and factory overhead, $391,160. Using the weighted-average method, the equivalent unit cost of materials for May is:

The weighted-average method assumes that there is no beginning inventory. In other words, all units are started in the current period and all costs are incurred in the current period. Therefore, the assumption is that 116,000 units were added in the period, of which 92,000 were completed and 24,000 are in the ending inventory. The 24,000 units in ending inventory are 90% complete with respect to materials. The equivalent units for materials = (units completed during the period) + (equivalent units in ending inventory) Equivalent units for materials = 92,000 + 0.9 × (24,000) = 113,600 Total material cost for the period = $54,560 + $468,000 = $522,560 Equivalent unit cost for materials = (total material cost for the period) ÷ (total equivalent units for materials) Equivalent unit cost for materials = ($522,560) ÷ (113,600) = $4.60. 4.60

Kepler Optics makes lenses for telescopes. Because Kepler will only sell lenses of the highest quality, the normal spoilage during a reporting period is 1,000 units. At the beginning of the current reporting period, Kepler had 2,200 units in inventory, and during the period, production was started and completed on 4,000 units. Units in inventory at the end of the current reporting period were 1,500, and the units transferred out were 3,000. During this period, the abnormal spoilage for Kepler's lens production was:

Total spoilage = beginning units + units started and completed − units transferred out − ending units = 2,200 + 4,000 − 3,000 - 1,500 = 1,700 Abnormal spoilage = Total spoilage − Normal spoilage = 1,700 − 1,000 = 700. 700

San Jose Inc. uses a weighted-average process costing system. All materials are introduced at the start of manufacturing, and conversion cost is incurred evenly throughout production. The company started 70,000 units during May and had the following work-in-process inventories at the beginning and end of the month. May 1 - 30,000 units, 40% complete May 31 - 24,000 units, 25% complete Assuming no spoilage or defective units, the total equivalent units used to assign costs for May are:

Units completed = Beginning Inventory + Units Added − Ending Inventory Units completed = 30,000 units + 70,000 units − 24,000 units Units completed = 76,000 The weighted-average method assumes that all units and costs are current (i.e., there is no beginning inventory). Therefore, the equivalent units of material required would be 100,000 (the 76,000 completed + 24,000 in the ending inventory). The equivalent units of conversion cost = (76,000 completed) + (24,000 units 25% complete) Equivalent units of conversion cost = 76,000 + 6,000 = 82,000. Materials = 100,000, Conversion Cost = 82,000.