The sections commonly found in a cost of duction report are: a a quantity scheduleindicating the source and disposition of theunits of product, b a cost charged to thedepartment section,
Trang 1CHAPTER 6
DISCUSSION QUESTIONS
Q6-1 The basic objective of process costing is to
determine the costs of the products
manufac-tured by the company Determining the cost of
the products manufactured is necessary in
order to properly cost ending inventories for
external reporting purposes (i.e., reporting to
creditors and owners of the company, the
SEC, and the IRS) and to evaluate the
prof-itability of the manufacturing activity In order
to cost products, the costs must be
deter-mined for materials, labor, and factory
over-head used to process each unit of product
through each department
Q6-2 The products manufactured within a
depart-ment (or cost center) during the period can be
heterogeneous if job order costing is used,
but must be homogeneous if process costing
is used In job order costing, products are
accounted for in batches The cost of each
unit of product manufactured on a job is
deter-mined by dividing the total cost charged to the
job by the number of units produced on the
job Since the manufacturing cost of each job
is accounted for separately, accurate and
useful product cost can be determined even
when the products manufactured on different
jobs are substantially different By contrast, in
process costing, all manufacturing costs are
charged to the department, and the unit cost
is determined by dividing the cost charged to
the department by the number of units
pro-duced As a consequence, the units of
prod-uct manufactured within a department must
be essentially alike in order for the cost
allo-cated to each unit to be meaningful (i.e., to
reasonably reflect the actual cost of the
resources used to manufacture the product)
Q6-3 (a) Process
(b) Process, unless significantly different
models are manufactured
Q6-4 Three product flow formats are: sequential,parallel, and selective
Sequential means that the product flows or ismanufactured in an unchanging fixed set ofoperations, going from one department to thenext
Parallel means that certain operationalphases take place simultaneously in otherdepartments and the partially completed units
or parts are brought together in subsequentdepartments
Selective refers to the fact that a product doesnot necessarily move through every depart-ment Depending upon the character or shape
of the final product, different departments areengaged in completing the desired product.Q6-5 Materials Costs—In job order costing, materi-als requisitions are used and charges aremade to jobs; in process costing, charges formaterials issued to production are made todepartments, with infrequent use of materialsrequisitions
Labor Costs—Time tickets are used in joborder costing to accumulate labor costs foreach job; in process costing, labor costs arecharged to departments, and, therefore,detailed time records are not necessary.Factory Overhead—Job order costingrequires the use of predetermined rates forcharging overhead to jobs; in process costing,actual overhead may be used (However, pre-determined rates are often used in order tosmooth overhead that is not incurred at thesame rate as production activity.)
Summarizing Costs—A job order cost sheet isused to accumulate the costs of an order in joborder costing; a cost of production report isused in process costing In job order costing,costs are summarized on completion of thejob; in process costing, costs charged to the
Trang 2department and costs accounted for are
sum-marized in the cost of production report each
month (or sometimes each week)
Q6-6 Predetermined overhead rates can and
should be used if the pattern of overhead cost
incurrence does not follow the pattern of
pro-duction activity Some items of overhead are
fixed and not responsive to changes in
produc-tion activity If producproduc-tion volume varies each
month, then predetermined overhead rates
should be used Some items of overhead are
incurred only at certain times during the year,
but benefit production throughout the year
(e.g., payroll taxes, insurance, property taxes,
vacation pay, etc.) These items can be
recorded as prepaid expenses and amortized
uniformly to each month if actual overhead is
charged to production Alternatively, estimates
of such costs can be included in the
predeter-mined overhead rate, and the actual cost
charged to overhead when incurred The use
of predetermined rates is often simpler than
the allocation of actual costs because a single
predetermined rate requires only one
over-head charge to each department each month
In contrast, the capitalization and
amortiza-tion of each item of actual overhead would
require numerous charges each month
Q6-7 A cost of production report is an effective
monthly (or weekly) summary of the cost of
materials, labor, and overhead consumed by
each department or cost center, along with a
record of the quantity of products manufactured
It provides information necessary to cost
products, prepare journal entries to record thetransfer of costs between departments, andcontrol costs
Q6-8 The sections commonly found in a cost of duction report are: (a) a quantity scheduleindicating the source and disposition of theunits of product, (b) a cost charged to thedepartment section, indicating the cost in totaland per unit for the cost transferred in fromthe preceding department, as well as materi-als, labor and overhead charged to thedepartment, and (c) a cost accounted for sec-tion indicating the amount of cost assigned tothe units transferred out of the department, aswell as the cost of ending inventory
pro-Q6-9 Separate departmental cost of productionreports are used to accumulate costs moreaccurately and to provide more detailed datafor cost control purposes than a plant-widecost of production report could provide Insome cases (e.g., a manufacturing plant thathas a selective production flow for its prod-ucts), a plant-wide cost of production reportcannot be used
Q6-10 An equivalent unit of production is the amount
of a resource (e.g., materials, labor, or head) that would be required to complete oneunit of the product with respect to the cost ele-ment being considered The total number ofequivalent units, with respect to a particularelement of cost, represents the number ofunits of the product that could have beencompleted with the resources used during theperiod
Trang 3E6-1
Department Materials Labor Overhead
Equivalent units transferred out 20,000 20,000 20,000 20,000 Equivalent units in ending inventory:
Cost from preceding department
Department Materials Labor Overhead
Cost in beginning inventory 0 0 0 0 Cost added during current period $40,000 $15,000 $ 9,600 $16,330 Total cost to be accounted for $40,000 $15,000 $ 9,600 $16,330 Divided by total equivalent units 25,000 25,000 24,000 23,000 Cost per equivalent unit $ 1.60 $ 60 $ 40 $ 71
E6-2
Work in Process—Department X 50,000
Work in Process—Department Y 40,000
Materials 90,000 Work in Process—Department X 80,000
Work in Process—Department Y 70,000
Payroll 150,000 Work in Process—Department X 180,000
Work in Process—Department Y 70,000
Factory Overhead 250,000 Work in Process—Department Y 300,000
Work in Process—Department X 300,000 Finished Goods Inventory 448,000
Work in Process—Department Y 448,000
Trang 4E6-3 Tyndol Fabricators Inc.
Cutting and Forming Department Cost of Production Report
Materials $ 17,923
Labor 2,352
Factory overhead 3,800
Total cost in beginning inventory $ 24,075
Cost added during current period:
Materials $ 68,625 3,850 $22.48 Labor 14,756 3,640 4.70 Factory overhead 29,996 3,550 9.52 Total cost added during current period $113,377
Total cost charged to department $137,452 $36.70
%
Work in Process, ending inventory:
Materials 600 75% $22.48 $10,116
Labor 600 40% 4.70 1,128
Factory overhead 600 25% 9.52 1,428 12,672
*Total number of equivalent units required in the cost accounted for section determined as follows:
Materials Labor Overhead Equivalent units transferred out 3,400 3,400 3,400
Equivalent units in ending inventory 450 240 150
Total equivalent units 3,850 3,640 3,550
** Total cost (i.e., the cost in beginning inventory plus the cost added during the current period)
divided by the total number of equivalent units required in the cost accounted for section
Trang 5E6-4 Tokyo Manufacturing Company
Molding Department Cost of Production Report
Materials $ 4,120
Labor 522
Factory overhead 961
Total cost in beginning inventory $ 5,603
Cost added during current period:
Materials $39,980 9,800 $4.50 Labor 12,638 9,400 1.40 Factory overhead 18,779 9,400 2.10 Total cost added during current period $71,397
Total cost charged to department $77,000 $8.00
%
Work in Process, ending inventory:
Materials 800 75% $4.50 $2,700
Labor 800 25% 1.40 280
Factory overhead 800 25% 2.10 420 3,400
*Total number of equivalent units required in the cost accounted for section determined as follows:
Materials Labor Overhead Equivalent units transferred out 9,200 9,200 9,200
Equivalent units in ending inventory 600 200 200
Total equivalent units 9,800 9,400 9,400
** Total cost (i.e., the cost in beginning inventory plus the cost added during the current period)
divided by the total number of equivalent units required in the cost accounted for section
Trang 6E6-5 Stanislov Corporation
Forming Department Cost of Production Report For September
Cost from preceding department $ 21,120
Materials 5,880
Labor 2,614
Factory overhead 5,228
Total cost in beginning inventory $ 34,842
Cost added during current period:
Cost from preceding department $ 68,280 6,000 $14.90 Materials 20,440 5,600 4.70 Labor 17,526 5,300 3.80 Factory overhead 35,052 5,300 7.60 Total cost added during current period $141,298
Total cost charged to department $176,140 $31.00
%
Transferred to Painting Department 5,000 100% $31.00 $155,000 Work in Process, ending inventory:
Cost from preceding department 1,000 100% $14.90 $14,900
Materials 1,000 60% 4.70 2,820
Labor 1,000 30% 3.80 1,140
Factory overhead 1,000 30% 7.60 2,280 21,140
*Total number of equivalent units required in the cost accounted for section determined as follows:
Prior Dept.
Equivalent units transferred out 5,000 5,000 5,000 5,000
Total equivalent units 6,000 5,600 5,300 5,300
** Total cost (i.e., the cost in beginning inventory plus the cost added during the current period)
divided by the total number of equivalent units required in the cost accounted for section
Trang 7E6-6 Sonneli Corporation
Assembly Department Cost of Production Report
Cost from preceding department $11,800
Materials 4,000
Labor 1,200
Factory overhead 2,400
Total cost in beginning inventory $19,400
Cost added during current period:
Cost from preceding department $63,200 2,500 $30.00 Materials 21,200 2,400 10.50 Labor 17,660 2,300 8.20 Factory overhead 35,320 2,300 16.40 Total cost added during current period $137,380
Total cost charged to department $156,780 $65.10
%
Transferred to Finished Goods 2,000 100% $65.10 $130,200 Work in Process, ending inventory:
Cost from preceding department 500 100% $30.00 $15,000
Materials 500 80% 10.50 4,200
Labor 500 60% 8.20 2,460
Factory overhead 500 60% 16.40 4,920 26,580
*Total number of equivalent units required in the cost accounted for section determined as follows:
Prior Dept.
Equivalent units transferred out 2,000 2,000 2,000 2,000
Total equivalent units 2,500 2,400 2,300 2,300
Trang 8E6-7 Saleri Manufacturing Corporation
Forming Department Cost of Production Report
Cost from preceding department $ 4,422
Material A 2,805
Material B 0
Labor 1,250
Factory overhead 1,875
Total cost in beginning inventory 10,352
Cost added during current period:
Cost from preceding department $ 29,328 4,500 $ 7.50 Material A 19,695 4,500 5.00 Material B 10,250 4,100 2.50 Labor 15,630 4,220 4.00 Factory overhead 23,445 4,220 6.00 Total cost added during current period $ 98,348
Total cost charged to department $108,700 $25.00
%
Transferred to Finishing Department 4,100 100% $25.00 $102,500 Work in Process, ending inventory:
Cost from preceding department 400 100% $7.50 $3,000
Material A 400 100% 5.00 2,000
Material B 400 0% 2.50 0
Labor 400 30% 4.00 480
Factory overhead 400 30% 6.00 720 6,200
*Total number of equivalent units required in the cost accounted for section determined as follows:
Prior Dept.
Cost Material A Material B Labor Overhead Equivalent units transferred out 4,100 4,100 4,100 4,100 4,100
Total equivalent units 4,500 4,500 4,100 4,220 4,220
** Total cost (i.e., the cost in beginning inventory plus the cost added during the current period)
divided by the total number of equivalent units required in the cost accounted for section
Trang 9E6-8 Canoli Cola Company
Carbonation Department Cost of Production Report
For October
Beginning inventory 1,000
9,000
Ending inventory 100% 25% 25% 1,200
9,000
Cost from preceding department $ 1,120
Materials 140
Labor 65
Factory overhead 120
Total cost in beginning inventory $ 1,445
Cost added during current period:
Cost from preceding department $ 9,680 9,000 $1.20 Materials 1,210 9,000 15 Labor 1,960 8,100 25 Factory overhead 3,120 8,100 40 Total cost added during current period $15,970
Total cost charged to department $17,415 $2.00
%
Work in Process, ending inventory:
Cost from preceding department 1,200 100% $1.20 $1,440
Materials 1,200 100% 15 180
Labor 1,200 25% 25 75
Factory overhead 1,200 25% 40 120 1,815
*Total number of equivalent units required in the cost accounted for section determined as follows:
Prior Dept.
Equivalent units transferred out 7,800 7,800 7,800 7,800
Equivalent units in ending inventory 1,200 1,200 300 300
Total equivalent units 9,000 9,000 8,100 8,100
Trang 10E6-9 Menezes Chemical Company
Blending Department Cost of Production Report
For March
Beginning inventory 5,000
30,000
Ending inventory 100% 80% 90% 4,000
30,000
Cost from preceding department $4,750
Materials 2,415
Labor 180
Factory overhead 787
Total cost in beginning inventory $8,112
Cost added during current period:
Cost from preceding department $25,250 30,000 $1.00 Materials 12,885 30,000 51 Labor 2,740 29,200 10 Factory overhead 8,113 29,600 30 Total cost added during current period $48,988
Total cost charged to department $57,100 $1.91
%
Work in Process, ending inventory:
Cost from preceding department 4,000 100% $1.00 $4,000
Materials 4,000 100% 51 2,040
Labor 4,000 80% 10 320
Factory overhead 4,000 90% 30 1,080 7,440
*Total number of equivalent units required in the cost accounted for section determined as follows:
Prior Dept.
Equivalent units transferred out 26,000 26,000 26,000 26,000
Equivalent units in ending inventory 4,000 4,000 3,200 3,600
Total equivalent units 30,000 30,000 29,200 29,600
** Total cost (i.e., the cost in beginning inventory plus the cost added during the current period)
divided by the total number of equivalent units required in the cost accounted for section
Trang 11E6-10 APPENDIX
Shankar Manufacturing Company
Cutting Department Cost of Production Report
Materials $2,940
Labor 390
Factory overhead 585
Total cost in beginning inventory $3,915
Cost added during current period:
Materials $46,530 940 $49.50 Labor 18,860 920 20.50 Factory overhead 27,150 905 30.00 Total cost added during current period $92,540
Total cost charged to department $96,455 $100.00
Transferred to Assembly Department:
Total cost transferred to Assembly
*Number of equivalent units of cost added during the current period determined as follows:
Materials Labor Overhead
To complete beginning inventory 40 80 80
Started and completed this period 750 750 750
Ending inventory 150 90 75
Total equivalent units 940 920 905
Trang 12E6-11 APPENDIX
Cantach Tool Company Assembly Department Cost of Production Report
Cost from preceding department $ 17,280
Materials 5,550
Labor 2,400
Factory overhead 3,600
Total cost in beginning inventory $ 28,830
Cost added during current period:
Cost from preceding department $ 40,600 2,800 $14.50 Materials 29,700 3,300 9.00 Labor 16,932 3,320 5.10 Factory overhead 25,398 3,320 7.65 Total cost added during current period $112,630
Total cost charged to department $141,460 $36.25
Trang 13E6-11 APPENDIX (Concluded)
Transferred to Finished Goods:
Work in Process, ending inventory:
Cost from preceding department 1,000 100% $14.50 $14,500
Materials 1,000 90% 9.00 8,100
Labor 1,000 80% 5.10 4,080
Factory overhead 1,000 80% 7.65 6,120 32,800
*Number of equivalent units of cost added during the current period determined as follows:
Prior Dept.
Started and completed this period 1,800 1,800 1,800 1,800
Ending inventory 1,000 900 800 800
Total equivalent units 2,800 3,300 3,320 3,320
** Cost added during the current period divided by the number of equivalent units of cost added ing the current period
Trang 14Ending inventory 100% 60% 80% 1,500
12,000
Cost from preceding department $2,460
Materials 500
Labor 150
Factory overhead 600
Total cost in beginning inventory $3,710
Cost added during current period:
Cost from preceding department $12,500 10,000 $1.25 Materials 2,500 10,000 25 Labor 3,300 11,000 30 Factory overhead 7,630 10,900 70 Total cost added during current period $25,930
Total cost charged to department $29,640 $2.50
Trang 15E6-12 APPENDIX (Concluded)
Transferred to Finished Goods:
Total cost transferred to Finished
Work in Process, ending inventory:
Cost from preceding department 1,500 100% $1.25 $1,875
Materials 1,500 100% 25 375
Labor 1,500 60% 30 270
Factory overhead 1,500 80% 70 840 3,360
*Number of equivalent units of cost added during the current period determined as follows:
Prior Dept.
Started and completed this period 8,500 8,500 8,500 8,500
Ending inventory 1,500 1,500 900 1,200
Total equivalent units 10,000 10,000 11,000 10,900
** Cost added during the current period divided by the number of equivalent units of cost added ing the current period
Trang 16P6-1
Cutting Department Cost of Production Report
Materials $ 5,365
Labor 530
Factory overhead 795
Total cost in beginning inventor $6,690
Cost added during current period:
Materials $26,035 785 $ 40.00 Labor 8,350 740 12.00 Factory overhead 12,525 740 18.00 Total cost added during current period $46,910
Total cost charged to department $53,600 $ 70.00
%
Work in Process, ending inventory:
Materials 150 90% $40.00 $5,400
Labor 150 60% 12.00 1,080
Factory overhead 150 60% 18.00 1,620 8,100
*Total number of equivalent units required in the cost accounted for section determined as follows:
Materials Labor Overhead
Total equivalent units 785 740 740
** Total cost (i.e., the cost in beginning inventory plus the cost added during the current period)
divided by the total number of equivalent units required in the cost accounted for section
Trang 17P6-1 (Continued)
Meninquez Cabinet Company Assembly Department Cost of Production Report
Cost from preceding department $ 17,410
Materials 3,451
Labor 3,611
Factory overhead 3,611
Total cost in beginning inventory $ 28,083
Cost added during current period:
Cost from preceding department $ 45,500 900 $ 69.90 Materials 14,273 840 21.10 Labor 20,989 820 30.00 Factory overhead 20,989 820 30.00 Total cost added during current period $101,751
Total cost charged to department $129,834 $151.00
Trang 18P6-1 (Concluded)
%
Transferred to Finished Goods 800 100% $151.00 $120,800 Work in Process, ending inventory:
Cost from preceding department 100 100% $69.90 $6,990
Materials 100 40% 21.10 844
Labor 100 20% 30.00 600
Factory overhead 100 20% 30.00 600 9,034
*Total number of equivalent units required in the cost accounted for section determined as follows:
Prior Dept.
Total equivalent units 900 840 820 820
** Total cost (i.e., the cost in beginning inventory plus the cost added during the current period)
divided by the total number of equivalent units required in the cost accounted for section
(2) Work in Process—Cutting Department 26,035
Work in Process—Assembly Department 14,273
Materials 40,308 Work in Process—Cutting Department 8,350
Work in Process—Assembly Department 20,989
Payroll 29,339 Work in Process—Cutting Department 12,525
Work in Process—Assembly Department 20,989
Applied Factory Overhead 33,514 Work in Process—Assembly Department 45,500
Work in Process—Cutting Department 45,500 Finished Goods Inventory 120,800
Work in Process—Assembly Department 120,800
Trang 19Casting Department Cost of Production Report
Materials $915
Labor 60
Factory overhead 90
Total cost in beginning inventory $ 1,085
Cost added during current period:
Materials $17,085 9,000 $2.00 Labor 4,290 8,700 50 Factory overhead 6,435 8,700 75 Total cost added during current period $27,810
Total cost charged to department $28,875 $3.25
%
Work in Process, ending inventory:
Materials 1,500 100% $2.00 $3,000
Labor 1,500 80% 50 600
Factory overhead 1,500 80% 75 900 4,500
*Total number of equivalent units required in the cost accounted for section determined as follows:
Equivalent units transferred out 7,500 7,500 7,500
Equivalent units in ending inventory 1,500 1,200 1,200
Total equivalent units 9,000 8,700 8,700
** Total cost (i.e., the cost in beginning inventory plus the cost added during the current period)
divided by the total number of equivalent units required in the cost accounted for section
Trang 20P6-2 (Continued)
Rimirez Tool Corporation Finishing Department Cost of Production Report
Ending inventory 40% 50% 2,000
9,000
Cost from preceding department $ 4,785
Labor 201
Factory overhead 555
Total cost in beginning inventory $ 5,541
Cost added during current period:
Cost from preceding department $24,375 9,000 $3.24 Labor 2,919 7,800 40 Factory overhead 3,125 8,000 46 Total cost added during current period $30,419
Total cost charged to department $35,960 $4.10
Trang 21P6-2 (Concluded)
%
Transferred to Finished Goods 7,000 100% $4.10 $28,700 Work in Process, ending inventory:
Cost from preceding department 2,000 100% $3.24 $6,480
Labor 2,000 40% 40 320
Factory overhead 2,000 50% 46 460 7,260
*Total number of equivalent units required in the cost accounted for section determined as follows:
Prior Dept.
Equivalent units transferred out 7,000 7,000 7,000
Equivalent units in ending inventory 2,000 800 1,000
Total equivalent units 9,000 7,800 8,000
** Total cost (i.e., the cost in beginning inventory plus the cost added during the current period)
divided by the total number of equivalent units required in the cost accounted for section
(2) Work in Process—Casting Department 17,085
Materials 17,085 Work in Process—Casting Department 4,290
Work in Process—Finishing Department 2,919
Payroll 7,209 Work in Process—Casting Department 6,435
Work in Process—Finishing Department 3,125
Applied Factory Overhead 9,560 Work in Process—Finishing Department 24,375
Work in Process—Casting Department 24,375 Finished Goods Inventory 28,700
Work in Process—Finishing Department 28,700