Computation of Equivalent Production

units
1 Units received from preceeding department 10,000
Units completed and transferred 8,000
Units in process, end (60% completed) 2,000
Materials are added 100% at the beginning of
the process

Solution:
1 Materials
Quantity schedule Actual Work done EUP
Units to be accounted:
Units received 10,000

Units completed 8,000 100% 8,000

Units in process 2,000 100% 2,000
Units accounted for: 10,000 10,000

Same data as in No.1 except this time materials are added 100% at the end of the process in the departm
2 Materials
Actual Work done EUP
Units received 10,000
Units completed 8,000 100% 8,000
Units in process 2,000 0% -
Units accounted for: 10,000 8,000

Same data as in No.1 except this time, materials are added 50% at the beginning of the process and the r
50% when the units are 40% completed.
3 Materials
Actual Work done EUP
Units received 10,000
Units completed 8,000 100% 8,000
Units in process 2,000 100% 2,000
10,000 10,000

Same data as in No.1 except this time, materials are added as follows:
50% at the beginning of the process
30% when the units are 20% complete
20% at the end of the process
4 Materials
Actual Work done EUP
Units received 10,000
Units completed 8,000 100% 8,000
Units in process 2,000 80% 1,600
10,000 9,600
 WEIGHTED AVERAGE METHOD, MULTIPLE DEPARTME
The following data were taken from the books of Michelle Co

Units
Started
Completed & Transferred
In process, end
Stage of completion

Labor & Overhead Costs

Work done EUP Materials

Labor

100% 8,000 Overhead

60% 1,200
9,200 In Department 1, materials are added at the beginning of the
Department 2, materials are added at the end of the process

of the process in the department. Michelle Co.

Labor & Overhead Cost of Production Report
Work done EUP for the month of June, 2012
(Department 1)
100% 8,000
60% 1,200 Quantity Schedule Actual
9,200 Units started 25,000
Units completed 20,000
Units in process, end 5,000
ning of the process and the remaining Units accounted for 25,000

Labor & Overhead Cost charged to the department

Work done EUP Cost added in the department
Materials
100% 8,000 Labor
60% 1,200 Overhead
9,200 Total added
Total cost to be accounted for

Cost accounted for as follows:

Completed & transferred
In process, end
Materials
Labor & Overhead Labor
Work done EUP Overhead
Total costs as accounted for
100% 8,000
60% 1,200
9,200 (Department 2)
Quantity Schedule Actual
Units received 20,000
Units completed 18,000
Units in process, end 2,000
20,000

Cost charged to the department

Cost from preceeding department
Cost added in the department
Materials
Labor
Overhead
Total added
Total cost to be accounted for

Cost accounted for as follows:

Finished Goods
In process, end
Cost from preceeding department
Materials
Labor
Overhead
Total costs as accounted for

MICHELLED CO.
COST OF GOODS MANUFACTURED STATEMENT

Direct Materials
Direct Labor
Factory overhead
Total manufacturing cost
Less Work in process, ending
Cost of goods manufactured
OD, MULTIPLE DEPARTMENTS, NO BEGINNING INVENTORY
rom the books of Michelle Co. for the month of June,
Department 1 Department 2

25,000
20,000 18,000
5,000 2,000
40% 50%

₱ 100,000 ₱ 54,000

66,000 38,000

44,000 19,000

added at the beginning of the process while in

ded at the end of the process.

at the beginning 40%

Materials Labor & Overhead
Work Done EUP Work Done EUP

100% 20,000 100% 20,000

100% 5,000 40% 2,000
25,000 22,000

Cost per EUP

100,000 ₱ 4.00
66,000 ₱ 3.00
44,000 ₱ 2.00
210,000 ₱ 9.00
210,000 ₱ 9.00

180,000

20,000
6,000
4,000 30,000
210,000

at the end 50%

 Materials Labor & Overhead
Work Done EUP Work Done EUP

100% 18,000 100% 18,000

0% - 50% 1,000
18,000 19,000

Cost per EUP

₱ 180,000 ₱ 9.00

₱ 54,000 ₱ 3.00
₱ 38,000 ₱ 2.00
₱ 19,000 ₱ 1.00
₱ 111,000 ₱ 6.00
₱ 291,000 ₱ 15.00

₱ 270,000

₱ 18,000
₱ -
₱ 2,000
₱ 1,000 ₱ 21,000
291,000

TURED STATEMENT
Total Department 1 Department 2
154,000 100,000 ₱ 54,000
104,000 66,000 ₱ 38,000
63,000 44,000 ₱ 19,000
321,000 210,000 111,000
51,000 30,000 ₱ 21,000
270,000
WEIGHTED AVERAGE METHOD, MULTIPLE DEPARTMENTS, NO BEGINNING INVENTORY
The following data were taken from the books of Michelle Co. for the month of June,
Department 1 Department 2
Units
Started 25,000
Completed & Transferred 20,000 18,000
In process, end 5,000 2,000
Stage of completion 40% 50%

Costs
Materials ₱ 100,000 ₱ 54,000

Labor 66,000 38,000

Overhead 44,000 19,000

In Department 1, materials are added at the beginning of the process while in

Department 2, materials are added at the end of the process.

Michelle Co.
Cost of Production Report
for the month of June, 2012
(Department 1) at the beginning 40%
Materials Labor & Overhead
Quantity Schedule Actual Work Done EUP Work Done
Units started 25,000
Units completed 20,000 100% 20,000 100%
Units in process, end 5,000 100% 5,000 40%
Units accounted for 25,000 25,000

Cost charged to the department

Cost added in the department Cost per EUP
Materials 100,000 ₱ 4.00
Labor 66,000 ₱ 3.00
Overhead 44,000 ₱ 2.00
Total added 210,000 ₱ 9.00
Total cost to be accounted for 210,000 ₱ 9.00

Cost accounted for as follows:

Completed & transferred 180,000
In process, end
Materials 20,000
Labor 6,000
Overhead 4,000 30,000
Total costs as accounted for 210,000

(Department 2) at the end 50%

Materials Labor & Overhead
Quantity Schedule Actual Work Done EUP Work Done
Units received 20,000
Units completed 18,000 100% 18,000 100%
Units in process, end 2,000 0% - 50%
20,000 18,000

Cost charged to the department Cost per EUP

Cost from preceeding department ₱ 180,000 ₱ 9.00
Cost added in the department
Materials ₱ 54,000 ₱ 3.00
Labor ₱ 38,000 ₱ 2.00
Overhead ₱ 19,000 ₱ 1.00
Total added ₱ 111,000 ₱ 6.00
Total cost to be accounted for ₱ 291,000 ₱ 15.00

Cost accounted for as follows:

Finished Goods ₱ 270,000
In process, end
Cost from preceeding department ₱ 18,000
Materials ₱ -
Labor ₱ 2,000
Overhead ₱ 1,000 ₱ 21,000
Total costs as accounted for 291,000

MICHELLED CO.
COST OF GOODS MANUFACTURED STATEMENT
Total Department 1 Department 2
Direct Materials 154,000 100,000 ₱ 54,000
Direct Labor 104,000 66,000 ₱ 38,000
Factory overhead 63,000 44,000 ₱ 19,000
Total manufacturing cost 321,000 210,000 111,000
Less Work in process, ending 51,000 30,000 ₱ 21,000
Cost of goods manufactured 270,000
VENTORY

Labor & Overhead

EUP

20,000
2,000
22,000

Labor & Overhead

EUP

18,000
1,000
19,000
FIRST IN - FIRST OUT

Computation of units cost:

𝐹𝐼𝐹�= (𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑝𝑒𝑟𝑖𝑜𝑑 𝑐𝑜𝑠𝑡)/(𝐸𝑞𝑢𝑖𝑣𝑎𝑙𝑒𝑛𝑡 𝑢𝑛𝑖𝑡𝑠 𝑜𝑓

𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑤𝑜𝑟𝑘 𝑑𝑜𝑛𝑒)

𝑊𝑒𝑖𝑔ℎ𝑡𝑒𝑑 𝐴𝑣𝑒𝑟𝑎𝑔𝑒= (𝐶𝑜𝑠𝑡 𝑖𝑛 𝑏𝑒𝑔. 𝑖𝑛𝑣𝑡𝑦+𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑝𝑒𝑟𝑖𝑜𝑑 𝑐𝑜𝑠𝑡)/(𝐸𝑞𝑢𝑖𝑣𝑎𝑙𝑒𝑛𝑡 𝑢𝑛𝑖𝑡𝑠 𝑖𝑛 𝑏𝑒𝑔. 𝑖𝑛𝑣𝑡𝑦.
+𝐸𝑞𝑢𝑖𝑣𝑎𝑙𝑒𝑛𝑡 𝑢𝑛𝑖𝑡𝑠 𝑜𝑓 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑤𝑜𝑟𝑘 𝑑𝑜𝑛𝑒)

Computation of the cost of goods transferred out and the cost of ending
inventory:

Using FIFO, the cost of goods transferred out equals the sum of the following three items:
a The costs already in the beginning inventory at the beginning of the period.
b The current period costs to complete beginning inventory, which equals the equivalent units to
complete beginning inventory times the current period unit cost computed for FIFO.
c The costs to start and complete units, calculated by multiplying the number times the current unit
cost computed.

Using FIFO, the cost of goods in ending inventory equals the equivalent units in ending inventory times
the unit current cost.

Using weighted average, the cost of goods transferred out equals the total units transferred out
times the weighted average unit cost.

Using weighted average, the cost of goods in ending inventory equals the equivalent units in
ending inventory times the weighted average unit cost.

STEPS FOR ASSIGNING PROCESS COSTS TO UNITS

1 Summarize the flow of physical units.

2 Compute the equivalent units produced.
Using FIFO, this means adding the equivalent units of work done to:
a Complete units in beginning inventory
b Start and complete units.
c Work on units still in ending inventory

Using weighted average, this means adding the equivalent units of work done
in the current period to the equivalent units of work already done in the beginning
inventory from the previous period.

3 Summarize the total costs to be accounted for.

The total costs to be accounted for are the costs in the beginning work in process
inventory and current period costs.
4 Compute costs per equivalent unit.
𝑢𝑛𝑖𝑡𝑠 𝑖𝑛 𝑏𝑒𝑔. 𝑖𝑛𝑣𝑡𝑦.

g three items:

equivalent units to

times the current unit

ts in ending inventory times

nits transferred out

quivalent units in

e beginning
FIFO AND WEIGHTED AVERAGE METHOD

COMPUTATION OF EQUIVALENT PRODUCTION

Problem 1
Units in process, beg. 40% complete 5,000
Units started 20,000 25,000
Units completed 18,000 13,000
Units in process, end 80% complete 7,000

Materials in this department are added 100% at the beginning of the process

Materials Labor & OH

a Average method Actual WD EUP WD EUP
Units completed 18,000 100% 18,000 100% 18,000
Units IP, end 7,000 100% 7,000 80% 5,600
25,000 25,000 23,600

Take note that under average method, the work done on the work in process,
beginning is not considered in the computation of the equivalent units of production.

b Materials Labor & OH

FIFO method Actual WD EUP WD EUP
Units completed
IP, beg. 5,000 0% - 60% 3,000
Started & completed 13,000 100% 13,000 100% 13,000
Units IP, end 7,000 100% 7,000 80% 5,600
25,000 20,000 21,600

No material was added to the units in process, beginning during the month because
as of the end of last month, the units were already 100% completed as to materials.
Problem 2
The following information relates to the operations of LMN Company for the month
of August, 2012

Units
In process, Aug. 1 40% complete 1,000
Received from Dept. 1 8,000
Completed & transferred 8,200
In process, Aug. 31 20% complete 800

Costs In process 8/1 Cost - Aug

Costs from preceeding dept. ₱ 13,500 ₱ 81,000
Materials ₱ 9,000 ₱ 72,000
Conversion costs ₱ 5,036 ₱ 83,580

Materials in this department are added 100% at the beginning of the process.

Solution:
Average Method

LMN COMPANY
Cost of Production Report
for the month of August 31, 2012

Quantity Schedule Materials Labor & OH

Actual WD EUP WD
Units to account for:
Units in process, beg. 1,000
Units received 8,000
9,000
Units accounted for:
Units completed 8,200 100% 8,200 100%
Units in process 800 100% 800 20%
9,000 9,000

Costs charged to the department

Cost from the preceeding department
In process, August 1 ₱ 13,500
Transferred-in during the month ₱ 81,000
₱ 94,500
Cost added in the department
In process, August 1
Materials ₱ 9,000
Labor & overhead ₱ 5,036
Added during the month
Materials ₱ 72,000
 Labor & overhead ₱ 83,580
Total cost added in the dept. ₱ 169,616
Total costs to be accounted for ₱ 264,116

Cost accounted for as follows:

Completed & transferred
In process, end
Cost from preceeding department ₱ 8,400
Materials ₱ 7,200
Labor & Overhead ₱ 1,696
Total costs as accounted for
 Journal entries
PARTICULARS DR CR
1 Work in process - Department 2 ₱ 81,000
Work in process - Department 1 ₱ 81,000

2 Work in process - Department 2 ₱ 155,580

Materials ₱ 72,000
Payroll - Factory overhead applied ₱ 83,580

3 Finished Goods ₱ 246,820

Work in process - Department 2 ₱ 246,820

Labor & OH
EUP

8,200
160
8,360

₱ 10.50

₱ 9.00
₱ 10.60
₱ 19.60
₱ 30.10

₱ 246,820

₱ 17,296
₱ 264,116
FIFO

LMN COMPANY
Cost of Production Report
for the month of August 31, 2012

Quantity Schedule Materials Labor & OH

Actual WD EUP WD EUP
Units to account for:
Units in process, beg. 1,000
Units received 8,000
9,000
Units accounted for:
Units completed
IP, beg. 1,000 0% - 60% 600
Rec'd & completed 7,200 100% 7,200 100% 7,200
Units in process, end 800 100% 800 20% 160
9,000 8,000 7,960

Costs charged to the department

Cost-in process, beg. ₱ 27,536
Cost from preceeding department ₱ 81,000 ₱ 10.125
Cost added in the department
Materials ₱ 72,000 ₱ 9.00
Labor & Overhead ₱ 83,580 ₱ 10.50
Total cost added in the department ₱ 155,580 ₱ 19.50
Total costs to be accounted for ₱ 264,116 ₱ 29.63
Cost accounted for as follows:
Completed & transferred
From IP, beg.
Cost last month ₱ 27,536
Cost added this month
Materials ₱ -
Labor & Overhead ₱ 6,300 ₱ 33,836
Rec'd & Completed ₱ 213,300 ₱ 247,136
In-process, end
Cost from preceeding department ₱ 8,100
Material ₱ 7,200
Labor & Overhead ₱ 1,680 ₱ 16,980
Total costs as accounted for ₱ 264,116
Journal entries
PARTICULARS DR CR
1 Work in process - Department 2 ₱ 81,000
Work in process - Department 1 ₱ 81,000

2 Work in process - Department 2 ₱ 155,580

Materials ₱ 72,000
Payroll - Factory overhead applied ₱ 83,580

3 Finished Goods ₱ 247,136

Work in process - Department 2 ₱ 247,136
WEIGHTED AVERAGE METHOD, SINGLE DEPARTMENT, EQUIVALENT UNITS, FIFO METHOD

Payson Company produces a product that passes through two departments: Mixing and Cooking.
Both departments use the weighted average method. In the Mixing department, all direct materials
are added at the beginning of the process. All other manufacturing inputs are added uniformly.
Payson uses the weighted average method.
The following information pertains to the Mixing department for February:
a. Beginning Work in Process (BWIP), February 1: 100,000 pounds, 100% complete with respect
to direct materials and 40% complete with respect to conversion costs. The costs assigned to
this work are as follows:
Direct materials ₱ 20,000
Direct labor ₱ 10,000
Overhead ₱ 30,000

b. Ending Work in Process (EWIP), February 28: 50,000 pounds, 100% complete with respect
to direct materials and 60% complete with respect to conversion costs.
c. Units completed and transferred out: 370,000 pounds.
The following costs were added during the month:
Direct materials ₱ 211,000
Direct labor ₱ 100,000
Overhead ₱ 270,000

Required:
1 Prepare a physical flow schedule.
2 Prepare a schedule of equivalent units.
3 Compute the cost per equivalent unit.
4 Compute the cost of goods transferred out and the cost of ending work in process
5 Prepare a cost reconciliation
6 Repeat Requirements 2-4 using the FIFO method.
NORMAL LOSSES & ABNORMAL LOSSES
Normal losses are expected while abnormal losses are those in excess of what
have been predicted.

The cost of normal lost units are reported as product cost,

since eventually they become part of the cost of goods units.

The cost of abnormal lost units are recognized as period costs as charges
for abnormal lost units are debited to Factory Overhead Control.

A. The cost of normal lost units is charged to:

a. completed units and
b units in process at the end when:
1 Discovered at the beginning of the process
2 Discovered during the process and no quality control inspection is indicated.
3 Discovered upon inspection and the units in process at the end have at least
reached the inspection point

Suggested procedures in calculating the equivalent units of production for normal lost units under:
1 Discovered at the beginning of the process
2 Discovered during the process and no quality control inspection is indicated.

a
b

Suggested procedures in calculating the equivalent units of production for normal lost units under:
3 Discovered upon inspection and the units in process at the end have at least
reached the inspection point

a
b

B The cost of normal lost units is charged to completed units only when:
1 Discovered at the end of the process or
2 Discovered upon the inspection and the units in process at the end have not yet
reached the inspection point

Suggested procedures in calculating the equivalent units of production for normal lost
units:
 a
b

C The cost of abnormal lost units is charged as an abnormal loss and debited to Factory
Overhead Control as a period cost.

Suggested procedures in calculating the equivalent units of production abnormal lost units
a

b
ORMAL LOSSES & ABNORMAL LOSSES
mal losses are expected while abnormal losses are those in excess of what
e been predicted.

cost of normal lost units are reported as product cost,

e eventually they become part of the cost of goods units.

cost of abnormal lost units are recognized as period costs as charges

bnormal lost units are debited to Factory Overhead Control.

The cost of normal lost units is charged to:

completed units and
units in process at the end when:
Discovered at the beginning of the process
Discovered during the process and no quality control inspection is indicated.
Discovered upon inspection and the units in process at the end have at least
reached the inspection point

Suggested procedures in calculating the equivalent units of production for normal lost units under:
Discovered at the beginning of the process
Discovered during the process and no quality control inspection is indicated.

Do not assign work done to the lost units, and

Adjust the unit cost from the preceeding department due to the decreased
number of units.
The above procedures automatically charge the cost of the normal lost
units to both completed units and units in process at the end.

Suggested procedures in calculating the equivalent units of production for normal lost units under:
Discovered upon inspection and the units in process at the end have at least
reached the inspection point

Assign work done to the lost units.

No need to adjust the unit cost from the preceeding department despite the lost
units.
Calculate the cost of the equivalent unit of production for lost units and prorate
to complete units and to units in process at the end using the whole or equivalent
units under the same classification as the cost to be allocated.

The cost of normal lost units is charged to completed units only when:
Discovered at the end of the process or
Discovered upon the inspection and the units in process at the end have not yet
reached the inspection point

Suggested procedures in calculating the equivalent units of production for normal lost
 Assign work done to the lost units
No need to adjust the unit cost from the preceeding department despite the lost
unis
Calculate the cost of lost units and charge as an additional cost of completed
units.

The cost of abnormal lost units is charged as an abnormal loss and debited to Factory
Overhead Control as a period cost.

Suggested procedures in calculating the equivalent units of production abnormal lost units
If discovered at the beginning of the process, no need to assign work done.
Any cost from the preceeding department is charged as an abnormal loss.
If discovered at any other points in the process, with or without indicated
inspection point, assign work done and the cost is charged to Factory Overhead
Control.
PROBLEM 3 Weighted Average
The following data were taken from the books of Denver Company which DENVER COMPANY
manufactures a single product through a two-department manufacturing process- Cost of Production Re
machining and finishing. In the production process, mates are added to the for the month of April
product in both departments. Normal spoilage occurs in the finishing department,
and the spoiled units are not detected until units are completed and inspected. Quantity Schedule

Machining Finishing Units to account for:

Department Department Units in process, be
Units: Units received
Beginning inventory - 20,000
Stage of completion 50% Units accounted for:
Transferred in - 60,000 Units completed
Started in production 80,000 - Units in process, end
Transferred out 60,000 60,000 Units lost
Ending inventory 20,000 18,000
Stage of completion 25% 70%
Spoiled (lost) units 0 2,000 Costs charged to the d
Beginning inventory costs: Cost from preceeding d
Direct materials ₱ - ₱ 28,000 IP, beginning
Conversion costs ₱ - ₱ 27,500 Transferred in durin
Prior department costs ₱ - ₱ 118,000
Current costs: Cost added in the depar
Direct materials ₱ 320,000 ₱ 90,000 IP, beginning
Conversion costs ₱ 130,000 ₱ 193,800

Requirements: Added during the m

Prepare cost of production report for April, 2012 using
1 FIFO
2 Average method Total cost added in t
Adjustment for lost u
Total costs to be accoun

Cost accounted for as

Completed & transferred
In-process, end
Cost from preceedin
Material
Labor & Overhead
Total costs as accounte
Weighted Average
DENVER COMPANY
Cost of Production Report
for the month of April 30, 2012
Finishing Department
Quantity Schedule Materials Labor & OH
Actual WD EUP WD EUP
Units to account for:
Units in process, beg. 20,000
Units received 60,000
80,000
Units accounted for:
Units completed 60,000 100% 60,000 100% 60,000
Units in process, end 18,000 100% 18,000 70% 12,600
Units lost 2,000 0% - 0% -
80,000 78,000 72,600

Costs charged to the department

Cost from preceeding department
IP, beginning ₱ 118,000
Transferred in during the month ₱ 360,000
₱ 478,000 ₱ 5.9750
Cost added in the department
IP, beginning
Materials ₱ 28,000
Labor & Overhead ₱ 27,500
Added during the month
Materials ₱ 90,000 ₱ 1.5128
Labor & Overhead ₱ 193,800 ₱ 3.0482
Total cost added in the department ₱ 339,300 ₱ 4.5610
Adjustment for lost units ₱ 0.1532
Total costs to be accounted for ₱ 817,300 ₱ 10.6892

Cost accounted for as follows:

Completed & transferred ₱ 641,354
In-process, end
Cost from preceeding department ₱ 110,308
Material ₱ 27,231
Labor & Overhead ₱ 38,407 ₱ 175,946
Total costs as accounted for ₱ 817,300
NORMAL LOSSES & ABNORMAL LOSSES
SOLUTION:
Woodrose Corporation produces a product in two departments - A and B. Data for 1
the month of August, 2012 are given as follows for Department B.

Units
Received from Department A 50,000
Completed and transferred to warehouse 40,000
In Process, Aug. 31 (60% completed) 5,000
Lost during the month 5,000

Costs
From Department A ₱ 225,000
Added in Department B during the month
Materials ₱ 135,000
Labor ₱ 103,200
Factory Overhead ₱ 103,200

In this department, materials are added 100% at the beginning of the process.

Requirements: Prepare cost of production report under the following assumptions:

1 Lost units classified as normal, discovered at the beginning of the process.
2 Lost units classified as normal, discovered at the end of the process.
3 Lost units classified as abnormal, discovered at the end of the process.
SOLUTION:
Lost units classified as normal, discovered at the beginning of the process (A1)

WOODROSE CORPORATION
Cost of Production Report
for the month ended August 31, 2012

Quantity Schedule Materials Labor & OH

Actual WD EUP WD EUP
Units to account for:
Units received 50,000

Units accounted for:

Units completed 40,000 100% 40,000 100% 40,000
Units in process 5,000 100% 5,000 60% 3,000
Units lost 5,000 0% - 0% -
50,000 45,000 43,000

Costs charged to the department

Cost from the preceeding department ₱ 225,000 ₱ 4.50 ₱ 5.00
Cost added in the department
Materials ₱ 135,000
₱ 3.00
Labor ₱ 103,200
₱ 2.40
Factory Overhead ₱ 103,200
₱ 2.40
Total cost added ₱ 341,400
₱ 7.80
Adjustment for lost units ₱ 0.50
Total costs to be accounted for ₱ 566,400 ₱ 12.80

Cost accounted for as follows:

Completed & transferred ₱ 512,000
In process, end
Cost from preceeding department ₱ 25,000
Materials ₱ 15,000
Labor ₱ 7,200
Overhead ₱ 7,200 ₱ 54,400
Total costs as accounted for ₱ 566,400
Journal entries
PARTICULARS DR CR 2
1 Work in process - Department B ₱ 225,000
Work in process - Department A ₱ 225,000

2 Work in process - Department B ₱ 341,400

Materials ₱ 135,000
Payroll ₱ 103,200
Factory Overhead Applied ₱ 103,200

3 Finished Goods ₱ 512,000

Work in process - Department B ₱ 512,000
Lost units classified as normal, discovered at the end of the process (B1)

WOODROSE CORPORATION
Cost of Production Report
for the month ended August 31, 2012

Quantity Schedule Materials Labor & OH

Actual WD EUP WD EUP
Units to account for:
Units received 50,000

Units accounted for:

Units completed 40,000 100% 40,000 100% 40,000
Units in process 5,000 100% 5,000 60% 3,000
Units lost 5,000 100% 5,000 100% 5,000
50,000 50,000 48,000

Costs charged to the department

Cost from the preceeding department ₱ 225,000 ₱ 4.50
Cost added in the department
Materials ₱ 135,000 ₱ 2.70
Labor ₱ 103,200 ₱ 2.15
Factory Overhead ₱ 103,200 ₱ 2.15
Total cost added ₱ 341,400 ₱ 7.00

Total costs to be accounted for ₱ 566,400 ₱ 11.50

Cost accounted for as follows:

Completed & transferred ₱ 517,500
In process, end
Cost from preceeding department ₱ 22,500
Materials ₱ 13,500
Labor ₱ 6,450
Overhead ₱ 6,450 ₱ 48,900
Total costs as accounted for ₱ 566,400
Journal entries
PARTICULARS DR CR 3
1 Work in process - Department B ₱ 225,000
Work in process - Department A ₱ 225,000

2 Work in process - Department B ₱ 341,400

Materials ₱ 135,000
Payroll ₱ 103,200
Factory Overhead Applied ₱ 103,200

3 Finished Goods ₱ 517,500

Work in process - Department B ₱ 517,500
Lost units classified as abnormal, discovered at the end

WOODROSE CORPORATION
Cost of Production Report
for the month ended August 31, 2012

Quantity Schedule Materials Labor & OH

Actual WD EUP WD EUP
Units to account for:
Units received 50,000

Units accounted for:

Units completed 40,000 100% 40,000 100% 40,000
Units in process 5,000 100% 5,000 60% 3,000
Units lost 5,000 100% 5,000 100% 5,000
50,000 50,000 48,000

Costs charged to the department

Cost from the preceeding department ₱ 225,000 ₱ 4.50
Cost added in the department
Materials ₱ 135,000 ₱ 2.70
Labor ₱ 103,200 ₱ 2.15
Factory Overhead ₱ 103,200 ₱ 2.15
Total cost added ₱ 341,400 ₱ 7.00

Total costs to be accounted for ₱ 566,400 ₱ 11.50

Cost accounted for as follows:

Completed & transferred ₱ 460,000
Factory overhead control ₱ 57,500
In process, end
Cost from preceeding department ₱ 22,500
Materials ₱ 13,500
Labor ₱ 6,450
Overhead ₱ 6,450 ₱ 48,900
Total costs as accounted for ₱ 566,400
Journal entries ILLUSTRATIVE
PARTICULARS DR CR Alet Corporation
1 Work in process - Department B ₱ 225,000 uniformly throuh
Work in process - Department A ₱ 225,000 and 70% followi
spoilage is disco
2 Work in process - Department B ₱ 341,400 The following in
Materials ₱ 135,000
Payroll ₱ 103,200
Factory Overhead Applied ₱ 103,200 Units received f
Units completed
3 Finished Goods ₱ 460,000 Units in process
Factory overhead control ₱ 57,500 Cost added in th
Work in process - Department B ₱ 517,500

Required: Prepa
March, 2012.
ILLUSTRATIVE PROBLEM
Alet Corporation uses process costing. In Department 2 conversion costs are incurred
uniformly throuhgout the process. Materials are added 30% at the start of the process
and 70% following inspection which occurs at the 90% stage of completion. Normal
spoilage is discovered during the inspection and is expected to be 5% of goods units.
The following information relates to Department 2 for the month of March, 2012.

Units Pesos
Units received from Department 1 12,000 ₱ 84,000
Units completed and transferred 9,000
Units in process, end (70% complete) 2,000
Cost added in the department
Materials ₱ 19,800
Conversion cost ₱ 45,200

Required: Prepare a Cost of Production Report for Department 2 for the month of
March, 2012.
ALET CORPORATION
Cost of Production Report
for the month of March, 2012

Quantity Schedule Materials Labor & OH

Actual WD EUP WD EUP
Units to account for:
Units received 12,000

Units accounted for:

Units completed 9,000 100% 9,000 100% 9,000
Units in process 2,000 30% 600 70% 1,400
Unit lost - normal 450 30% 135 90% 405
Unit lost - abnormal 550 30% 165 90% 495
12,000 9,900 11,300

Costs charged to the department

Cost from the preceeding department ₱ 84,000 ₱ 7.00
Cost added in the department
Materials ₱ 19,800 ₱ 2.00
Conversion cost ₱ 45,200 ₱ 4.00

Total cost added ₱ 65,000 ₱ 6.00

Total costs to be accounted for ₱ 149,000 ₱ 13.00

Cost accounted for as follows:

Completed & transferred ₱ 122,040
Factory overhead control ₱ 6,160
In process, end
Cost from preceeding department ₱ 14,000
Materials ₱ 1,200
Conversion cost ₱ 5,600
₱ 20,800
Total costs as accounted for ₱ 149,000
B The cost of normal lost units is charged to completed units only when:
1 Discovered at the end of the process or Journal entries
2 Discovered upon the inspection and the units in process at the end have not yet PARTIC
reached the inspection point 1 Work in process -
Suggested procedures in calculating the equivalent units of production for normal lost
units:
a Assign work done to the lost units 2 Work in process -
b No need to adjust the unit cost from the preceeding department despite the lost
unis
c Calculate the cost of lost units and charge as an additional cost of completed
units.
3 Finished Goods
Suggested procedures in calculating the equivalent units of production abnormal lost units Factory overhead
a If discovered at the beginning of the process, no need to assign work done.
Any cost from the preceeding department is charged as an abnormal loss.
b If discovered at any other points in the process, with or without indicated
inspection point, assign work done and the cost is charged to Factory Overhead
Control.
Journal entries
PARTICULARS DR CR
Work in process - Department 2 ₱ 84,000
Work in process - Department 1 ₱ 84,000

Work in process - Department 2 ₱ 65,000

Materials ₱ 19,800
Conversion cost ₱ 45,200

Finished Goods ₱ 122,040

Factory overhead control ₱ 6,160
Work in process - Department 2 ₱ 128,200
ILLUSTRATIVE PROBLEM
Maxine Corporation uses process costing in its two producing departments. In
Department 2, inspection takes place at the 70% stage of completion, after which
materials are added to good units. A spoilage rate of 5% of good units is considered
normal. Materials are added 30% at the start of the process and 70% following
inspection. Suggested procedures in ca
A 3 Discovered upon insp
UNITS reached the inspectio
Received from Department 1 (at P7 per unit) 12,000
Completed and transferred 9,000 a
In process, end (90% complete) 2,000 b

COSTS c
Added in the department:
Materials ₱ 22,600
Conversion costs ₱ 46,000

Required: Cost of Production Report for the month of April, 2012

 MAXINE CORPORATION
Cost of Production Repor
Suggested procedures in calculating the equivalent units of production for normal lost units under: for the month of April, 201
Discovered upon inspection and the units in process at the end have at least
reached the inspection point Quantity Schedule

Assign work done to the lost units. Units to account for:

No need to adjust the unit cost from the preceeding department despite the lost
units.
Calculate the cost of the equivalent unit of production for lost units and prorate Units accounted for:
to complete units and to units in process at the end using the whole or equivalent
units under the same classification as the cost to be allocated.

Costs charged to the dep

Cost accounted for as fol

COMPUTATIONS:

Cost of lost units - norma

Cost from preceeding depa

Materials
Conversion cost
Total
 Journal entrie
PA
1
MAXINE CORPORATION
Cost of Production Report
for the month of April, 2012 2

Quantity Schedule Materials Labor & OH

Actual WD EUP WD EUP
Units to account for:
Units received 12,000 3

Units accounted for:

Units completed 9,000 100% 9,000 100% 9,000
Units in process 2,000 100% 2,000 90% 1,800
Unit lost - normal 550 30% 165 70% 385
Unit lost - abnormal 450 30% 135 70% 315
12,000 11,300 11,500

Costs charged to the department

Cost from the preceeding department ₱ 84,000 ₱ 7.00
Cost added in the department
Materials ₱ 22,600 ₱ 2.00
Conversion cost ₱ 46,000 ₱ 4.00

Total cost added ₱ 68,600 ₱ 6.00

Total costs to be accounted for ₱ 152,600 ₱ 13.00

Cost accounted for as follows:

Completed & transferred ₱ 121,703
Factory overhead control ₱ 4,680
In process, end
Cost from preceeding department ₱ 14,000
Materials ₱ 4,000
Conversion cost ₱ 7,200
Share-lost units normal ₱ 1,017 ₱ 26,217
Total costs as accounted for ₱ 152,600

COMPUTATIONS:
Allocated to Allocated to
Total Compl. & Transf. IP, end
Cost of lost units - normal 11,000 9,000 2,000
10,800 9,000 1,800
Cost from preceeding department 3,850 3,150 700
330 270 60
Conversion cost 1,540 1,283.33 256.67
5,720 4,703 1,017
 INCREASE IN UNITS DUE T
Journal entries
PARTICULARS DR CR Computation of adjusted cost
Work in process - Department 2 ₱ 84,000
𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑 𝑐𝑜𝑠𝑡 𝑓𝑟𝑜𝑚 𝑝𝑟𝑒𝑐𝑒𝑒
Work in process - Department 1 ₱ 84,000 𝑝𝑟𝑒𝑐𝑒𝑒𝑑𝑖𝑛𝑔 𝑑𝑒𝑝𝑎𝑟𝑡𝑚𝑒𝑛𝑡)/(

Work in process - Department 2 ₱ 68,600

Materials ₱ 22,600
Conversion cost ₱ 46,000 If lost units are discovered in
in units, the adjusted cost will

Finished Goods ₱ 121,703 a.

Factory overhead control ₱ 4,680
𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑 𝑐𝑜𝑠𝑡 𝑓𝑟𝑜𝑚 𝑝𝑟𝑒
Work in process - Department 2 ₱ 126,383 𝑝𝑟𝑒𝑐𝑒𝑒𝑑𝑖𝑛𝑔 𝑑𝑒𝑝𝑎𝑟𝑡𝑚𝑒𝑛

𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑 𝑐𝑜𝑠𝑡 𝑓𝑟𝑜𝑚 𝑝𝑟𝑒

𝑝𝑟𝑒𝑐𝑒𝑒𝑑𝑖𝑛𝑔 𝑑𝑒𝑝𝑎𝑟𝑡𝑚𝑒𝑛

𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑 𝑐𝑜𝑠𝑡 𝑓𝑟𝑜𝑚 𝑝𝑟

𝑝𝑟𝑒𝑐𝑒𝑒𝑑𝑖𝑛𝑔 𝑑𝑒𝑝𝑎𝑟𝑡𝑚𝑒𝑛
INCREASE IN UNITS DUE TO ADDITION OF MATERIALS

Computation of adjusted cost from preceeding department Seashore Company produces

In the second department, ma
𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑 𝑐𝑜𝑠𝑡 𝑓𝑟𝑜𝑚 𝑝𝑟𝑒𝑐𝑒𝑒𝑑𝑖𝑛𝑔 𝑑𝑒𝑝𝑎𝑟𝑡𝑚𝑒𝑛𝑡=(𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡 𝑓𝑟𝑜𝑚
𝑝𝑟𝑒𝑐𝑒𝑒𝑑𝑖𝑛𝑔 𝑑𝑒𝑝𝑎𝑟𝑡𝑚𝑒𝑛𝑡)/(𝑈𝑛𝑖𝑡𝑠 𝑟𝑒𝑐𝑒𝑖𝑣𝑒𝑑+𝑖𝑛𝑐𝑟𝑒𝑎𝑠𝑒 𝑖𝑛 𝑢𝑛𝑖𝑡𝑠) received by 20%. The followin

Units received from Dept. 1

Units completed & transferred
If lost units are discovered in the same department where we had an increase Units in process, end
in units, the adjusted cost will be computed based on the following assumptions:
Cost from Department 1
Lost units normal, discovered at the beginning of the process

𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑 𝑐𝑜𝑠𝑡 𝑓𝑟𝑜𝑚 𝑝𝑟𝑒𝑐𝑒𝑒𝑑𝑖𝑛𝑔 𝑑𝑒𝑝𝑎𝑟𝑡𝑚𝑒𝑛𝑡=(𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡 𝑓𝑟𝑜𝑚

𝑝𝑟𝑒𝑐𝑒𝑒𝑑𝑖𝑛𝑔 𝑑𝑒𝑝𝑎𝑟𝑡𝑚𝑒𝑛𝑡)/(𝑈𝑛𝑖𝑡𝑠 𝑟𝑒𝑐𝑒𝑖𝑣𝑒𝑑 −𝑙𝑜𝑠𝑡 𝑢𝑛𝑖𝑡𝑠)

Required: Cost of production

Lost units normal, discovered at the end of the process

𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑 𝑐𝑜𝑠𝑡 𝑓𝑟𝑜𝑚 𝑝𝑟𝑒𝑐𝑒𝑒𝑑𝑖𝑛𝑔 𝑑𝑒𝑝𝑎𝑟𝑡𝑚𝑒𝑛𝑡=(𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡 𝑓𝑟𝑜𝑚

𝑝𝑟𝑒𝑐𝑒𝑒𝑑𝑖𝑛𝑔 𝑑𝑒𝑝𝑎𝑟𝑡𝑚𝑒𝑛𝑡)/(𝑈𝑛𝑖𝑡𝑠 𝑟𝑒𝑐𝑒𝑖𝑣𝑒𝑑)

Lost units abnormal, discovered at the beginning, during or at the end

𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑 𝑐𝑜𝑠𝑡 𝑓𝑟𝑜𝑚 𝑝𝑟𝑒𝑐𝑒𝑒𝑑𝑖𝑛𝑔 𝑑𝑒𝑝𝑎𝑟𝑡𝑚𝑒𝑛𝑡=(𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡 𝑓𝑟𝑜𝑚

𝑝𝑟𝑒𝑐𝑒𝑒𝑑𝑖𝑛𝑔 𝑑𝑒𝑝𝑎𝑟𝑡𝑚𝑒𝑛𝑡)/(𝑈𝑛𝑖𝑡𝑠 𝑟𝑒𝑐𝑒𝑖𝑣𝑒𝑑)
Seashore Company produces a product which requires processing in the departments.
In the second department, materials are added at the beginning, increasing the units
received by 20%. The following data pertain to the operations of Dept. 2 for June.

Units received from Dept. 1 50,000 units

Units completed & transferred to Dept. 3 45,000 units
Units in process, end 15,000 units
Stage of completion 80%
Cost from Department 1 ₱ 600,000
Materials ₱ 240,000
Labor ₱ 171,000
Overhead ₱ 114,000

Required: Cost of production report

 10.5

SEASHORE COMPANY
Cost of Production Report
for the month of June, 2012

Quantity Schedule Materials Labor & OH

Actual WD EUP WD EUP
Units to account for:
Units received 50,000
Increase in units 10,000
60,000
Units accounted for:
Units completed 45,000 100% 45,000 100% 45,000
Units in process 15,000 100% 15,000 80% 12,000
- -
- -
60,000 60,000 57,000

Costs charged to the department

Cost from the preceeding department ₱ 600,000 ₱ 12.00
Cost added in the department
Materials ₱ 240,000 ₱ 4.00
Labor ₱ 171,000 ₱ 3.00
Overhead ₱ 114,000 ₱ 2.00
Total cost added ₱ 525,000 ₱ 9.00
Adjusted cost from preceeding department ₱ 10.00
Total costs to be accounted for ₱ 1,125,000 ₱ 19.00

Cost accounted for as follows:

Completed & transferred ₱ 855,000

In process, end
Cost from preceeding department ₱ 150,000
Materials ₱ 60,000
Labor ₱ 36,000
Overhead ₱ 24,000 ₱ 270,000
Total costs as accounted for ₱ 1,125,000
Journal entries
PARTICULARS DR CR
1 Work in process - Department 2 ₱ 600,000
Work in process - Department 1 ₱ 600,000

2 Work in process - Department 2 ₱ 411,000

Materials ₱ 240,000
Payroll ₱ 171,000
Factory overhead applied ₱ 525,000

3 Finished Goods ₱ 855,000

Work in process - Department 2 ₱ 855,000