PRODUCT COSTING PRACTICAL ACCOUNTING 2

Process Costing

Problem 1. JVC Company makes fabric-covered hat boxes. The company began September
with 500 boxes in process that were 100 percent complete as to cardboard, 4/5 complete
as to cloth, and 3/5 complete as to conversion costs. During the month, 3,300 boxes were
started. On September 30, 350 boxes were in process (100 percent complete as to
cardboard, 30 percent incomplete as to cloth, and 45 percent incomplete as to conversion
costs).
Using the FIFO method, what are equivalent units for cloth?
A. 3,295
B. 3,450
C. 3,395
D. 3,595

Problem 2. URL Company uses a FIFO process costing system. The company had 10,000
units that were 40% percent incomplete as to conversion costs at the beginning of the
month. The company started 30,000 units this period and had 9,000 units in ending Work
In Process inventory that were 50% complete as to conversion costs.
What are the equivalent units for conversion costs?
A. 35,500
B. 31,500
C. 29,500
D. 25,500

Problem 3. XYZ Company uses a weighted average process costing system and started
30,000 units this month. XYZ had 12,000 units that were 4/5 incomplete as to conversion
costs in beginning Work in Process Inventory and 3,000 units that were 40 percent
complete as to conversion costs in ending Work in Process Inventory.
What are equivalent units for conversion costs?
A. 37,800
B. 40,200
C. 40,800
D. 42,000

Problem 4. LMN Company Co. uses a FIFO process costing system. The company had 5,000
units that were 60 percent complete as to conversion costs at the beginning of the month.
The company started 22,000 units this period and had 7,000 units in ending Work in
Process Inventory that were 35 percent complete as to conversion costs.
What are equivalent units for materials, if materials are added at the beginning of the
process?
A. 18,000
B. 22,000
C. 25,000
D. 27,000

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Problem 5. Finale Manufacturing Co. operates two consecutive departments, X & Y and
uses FIFO costing. The February, 2012 production data for Department Y are as follows:
In process, February 1 12,000 units, l/3 incomplete
Received from Dept. X 60,000 units
In process, February 28 10,000 units, 2/5 completed
Normal loss 5,000 units
What should be the equivalent production assuming that the normal loss occurred at the
beginning? at the end? when the units were 1/5 completed?
At the beginning At the end One-fifth completed
A. 53,000 62,000 58,000
B. 53,000 58,000 54,000
C. 57,000 58,000 57,000
D. 61,000 66,000 62,000

Problem 6. Progress Manufacturing Company applies process costing in the

manufacture of its sole product, "enermix".
 Manufacturing starts in Department 1 where materials are all added at the
start of processing. The good units are then transferred to Department 2
where all the incremental materials needed for its completion are added after
final inspection.
 In Department 1, units are inspected at the end of processing while in
Department 2, inspection takes place when the units are 90% completed.
 Department 1 uses FIFO costing while Department 2 uses the weighted average
costing.
The production data for the month of August show the following:
UNITS Department 1 Department 2
Beginning work in process, August 1 8,000 4,000
Work to be done 80% 20%
Ending work in process, August 31 12,000 7,000
Work completed 2/3 5/7
Started in process during August 60,000
Normal spoilage (4% of units started in process) 1,000
Abnormal spoilage (1/4 of normal spoilage) 500
COST
Work in process, August 1:
Transferred in P- P114,180
Materials P54,000 P85,950
Conversion Costs P39,000 P112,290
Current costs:
Transferred in P- P?
Materials P792,000 P336,000
Conversion Costs P1,235,520 P513,000

Total costs transferred to Department 2 and the amount of work in-process, end in
Department 1
A. P1,690,920; P316,800
B. P1,783,920; P316,800
C. P1,704,720; P158,400
D. P1,783,920; P219,720
Total costs transferred to the Storeroom and the amount of work in-process, end in
Department 2
A. P2,633,460; P290,100
B. P2,589,900; P233,100
C. P2,589,900; P290,100
D. P2,633,460; P233,100

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Problem 7. The cost data and production data for Velocity Company for the month of
August were as follows:

Cost Data:
Work in process, August 1: Materials P20,800
Conversion costs P27,600
Cost added this month: Materials P240,000
Conversion costs P640,800
Production Data:
Work in process, August 1 (60% incomplete) 3,750 units
Started in production this August 40,000 units
Transferred out 36,250 units
Work in process, August 31 (30% to be done) 6,500 units
Normal lost units 550 units
Abnormal lost units ?

All materials are added at the start of the process and lost units are detected at the
inspection point of 75% completion.
Using the FIFO method, what are the costs assigned to units transferred out and units in
ending work in process?
Transferred out Ending WIP
A. P807,650 P113,450
B. P809,300 P111,800
C. P807,650 P111,800
D. P809,300 P113,450
Using the average method, what are the costs assigned to units transferred out and units in
ending work in process?
Transferred out Ending WIP
A. P807,638 P113,450
B. P799,229 P113,450
C. P809,143 P111,941
D. P799,212 P38,748
What is the cost of abnormal lost units?
FIFO Average
A. P8,100 P8,100
B. P9,900 P9,920
C. P5,430 P5,400
D. P8,100 P8,112

Problem 8. Vector Company employs process cost system. A unit of product passes
through two departments: Assembly and Finishing before it is complete. Information
regarding Assembly Department follow:
Work in-process, Aug 1 4,000 units
Spoiled units 3,000
Started in Production 26,000
Transferred out 24,000
Raw materials are added at the beginning of processing in the Assembly department
without changing the number of units being processed. Work in Process on August 1 was
90% complete as to conversion while 80% converted on August 31. In the Assembly
Department, inspection takes place when the units are 75% converted. The company
usually experienced a 5% loss based on the completed units. Cost data for the month of
August follow:
Materials Labor Overhead
Work in process beginning P32,400 P26,400 P28,500
Current cost P111,600 P88,200 P114,750
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Using Weighted Average costing, compute for the total cost of units transferred-out and
total cost of work in process, end:
A. P331,200; P37,376
B. P343,684; P37,376
C. P331,200; P36,000
D. P343,684; P36,000

Problem 9. The following information is available for Detox Company for the current year:
Beginning Work in Process (75% complete) 14,500 units
Started 75,000 units
Ending Work in Process (60% complete) 16,000 units
Abnormal spoilage 2,500 units
Normal spoilage (continuous) 5,000 units
Transferred out 66,000 units
Costs of Beginning Work in Process:
Material P25,100
Conversion 50,000
Current Costs:
Material P120,000
Conversion 300,000
All materials are added at the start of production.
Using FIFO, what is the cost per equivalent unit for conversion costs?
A. P4.46
B. P4.15
C. P4.30
D. P3.84

Problem 10. The production data for Department 1 for August 2012 are as follows:
Actual units
WIP, August 1 (1/4 done as to conversion costs) 40,000
Started in August 296,000
Transferred out during August 244,000
Spoiled units 32,000

Cost of beginning work in process:

Materials P500,000
Conversion Costs 60,000
Current costs:
Materials P2,960,000
Conversion Costs 1,884,000
Unit costs:
Materials P10
Conversion Costs 6

 Materials are added at the start of the process.

 Conversion costs are added evenly during the process.
 The company uses the FIFO method of costing.
 Inspection occurs, when production is 100% complete.
 Normal spoilage is 11% of good units transferred out during August.
What are the costs allocated to?
Next Department In-process, end in Dept 1 Period cost
A. P3,264,000 P1,370,560 P512,000
B. P4,456,000 P888,000 P82,560
C. P3,944,000 P1,317,440 P82,000

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D. P4,433,440 P888,000 P82,560

Job-order Costing

Problem 1. The following data were taken from the records of Fast Track Company:
08/31/2012 09/30/2012
Inventories
Raw materials P? P 50,000
Work in process P 80,000 P 95,000
Finished goods P 60,000 P 78,000

 Raw materials purchased amount to P46,000.

 Factory overhead amount to P63,000 which is 75% of direct labor cost.
 Selling and administrative expenses amount to P25,000 which is 8% of sales.
 Net income for September 2012, P40,000.

Compute for the cost of goods manufactured and the amount of raw materials inventory on
August 31,2012
A. P272,500; P162,500
B. P290,500; P162,500
C. P305,500; P154,500
D. P290,500; P154,500

Problem 2. Crack Company uses a job order costing system. During August 2012, the
following costs appeared in the Work in Process Inventory account:
Beginning balance P 192,000
Direct material used 560,000
Direct labor incurred 480,000
Applied overhead 384,000
Cost of goods manufactured 1,480,000
Crack Company applies overhead on the basis of direct labor cost. There was only one
job left in Work in Process at the end of August which contained P44,800 of overhead.
What amount of direct material was included in this job?
A. P35,200
B. P35,840
C. P55,360
D. P64,000

Problem 3. Products at Red Manufacturing are sent through two production departments:
Fabricating and Finishing. Overhead is applied to products in the Fabricating Department
based on 150 percent of direct labor cost and P18 per machine hour in Finishing. The
following information is available about Job #297:
Fabricating Finishing
Direct material P31,800 P11,600
Direct labor cost ? P960
Direct labor hours 440 120
Machine hours 100 300
Overhead applied P8,580 ?
What is the total cost of Job #297?
A. P52,940
B. P60,100
C. P61,860
D. P64,060

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Problem 4. Strong Products has no Work in Process or Finished Goods inventories at the
close of business on December 31, 2012. The balances of Strong Products' accounts as of
December 31, 2012, were as follows:
Cost of goods sold – unadjusted P6,120,000
Selling & administrative expenses 2,700,000
Sales 10,800,000
Manufacturing overhead control 2,100,000
Manufacturing overhead applied 1,944,000
Pretax income for 2012 is:
A. P1,824,000
B. P1,980,000
C. P2,136,000
D. P1,860,000

Problem 5. Speed Company uses a job order cost system. The following data were
obtained from the company's cost records as of July 31. No jobs were in process at the
beginning of July, all costs listed being incurred during the month.
Job Order No Direct Direct Direct
Materials Labor Labor Cost
Hours
1001 P4,320 1,300 P1,600
1002 9,150 3,700 7,250
1003 11,275 8,200 14,325
1004 3,225 1,500 2,800
1005 6,500 3,200 6,100
1006 2,750 980 1,650

 Manufacturing overhead costs are charged to jobs on the basis of P1.50 per direct
labor hour.
 The actual manufacturing overhead cost for the month totaled P30,350.
 During July, only Job Order Nos. 1003 and 1006, were still in process.
 Jobs 1001 and 1002 were shipped out and the customers were billed P9,000 for Job
1001 and P20,000 for Job 1002.
The cost of goods manufactured would be:
A. P55,500
B. P55,495
C. P56,495
D. P57,500

Problem 6. The Vigor Company uses job order costing. At the beginning of August, two
jobs were in process.
Job 769 Job 772
Materials P80,000 P28,000
Direct Labor P40,000 P12,000
Applied factory overhead P60,000 P18,000

 There was no inventory of finished goods on August 1.

 During the month of August, Job 773, 774, 776, 778 and 779 were started.
 Materials requisitions for August totaled P520,000 direct labor cost, P400,000 and
actual factory overhead, P640,000.
 The only job still in process at the end of August is Job 779, with costs of P56,000
materials and P36,000 for direct labor.

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  Job 776, the only finished job on hand at the end of August has a total cost of
P80,000.

The cost of goods sold at normal is:

A. P1,572,000
B. P1,532,000
C. P1,600,000
D. P1,652,000

Problem 7. XYZ Company has the following balances as of the year ended December 31,
2012:
Debit
Direct materials inventory P135,000
WIP inventory P310,500
Finished goods inventory P445,500
Cost of goods sold P670,500
Credit
Factory department overhead P36,000

Additional information were as follows:

Cost of direct materials purchased during 2012 P369,000
Cost of direct materials requisitioned in 2012 P423,000
Cost of goods completed during 2012 P918,000
Cost of direct labor P360,000
Factory overhead is applied at 120% of direct labor.

Beginning direct materials inventory; Beginning finished goods inventory; Actual

factory overhead incurred
A. P270,000; P225,000; P396,000
B. P189,000; P198,000; P396,000
C. P189,000; P216,000; P432,000
D. P270,000; P198,000; P468,000

Problem 8. W company has over applied overhead of P60,000 for the year. Before
disposition of over applied overhead, selected year end balances from W's accounting
records were:
Sales P1,000,000
Cost of Goods Sold 750,000
Direct Materials Inventory 50,000
Work in Process Inventory 180,000
Finished Goods Inventory 270,000
Under W's accounting system, over or under applied overhead is allocated to appropriate
inventories and cost of goods sold based on year end balances.
In its year end income statement, W should report cost of goods sold of
A. P712,500
B. P714,000
C. P730,000
D. P787,500

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Problem 9. NOP Company's Job 921 manufactured 13,750 units that was completed in
August at unit costs presented as follows:
Direct materials P50
Direct labor 45
Factory overhead (includes an allowance of P2.50
Spoiled work) 45
Final inspection of Job 921 disclosed 1,250 spoiled units, which were sold for P37,500.

What would be the unit cost of good units if the spoilage loss is attributable to exacting
specifications of Job747?
A. P137.50
B. P143.75
C. P140.00
D. P148.25

Problem 10. During August 2012, Faithfully Inc. incurred the following costs for Job 522
(450 drum sets):
Direct materials P42,500
Direct labor P65,250
Factory overhead P78,300

45 units of drum sets were found to be defective and Faithfully Inc. had to incur the
following to remedy the said defects:
Direct materials P13,550
Direct labor P15,250

If the rework cost is normal but specific to Job 522, the cost per finished unit is:
A. P518.11
B. P497.75
C. P575.68
D. P484.22

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