Managerial Accounting 3rd Edition Braun Solutions Manual 1

Managerial Accounting 3e Solutions Manual
Managerial Accounting 3rd Edition

Braun Solutions Manual
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Chapter 5
Process Costing
Quick Check
Answers:
QC-1. b QC-3. d QC-5. b QC-7. b QC-9. c

QC-2. d QC-4. a QC-6. b QC-8. c QC-10. d
Short Exercises
(5-10 min.) S 5-1
Job Costing System

• Direct materials, direct labor, and manufacturing overhead are assigned to each job.
• Direct materials, direct labor, and manufacturing overhead flow into a single Work in Process
Inventory control account that is supported by a subsidiary ledger of job cost records, one record
for each job.
• Costs of completed jobs are transferred directly to Finished Goods Inventory
Process Costing System
• Direct materials, direct labor, and manufacturing overhead are assigned to each manufacturing
process.
170 Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall

Chapter 5 Process Costing
• Direct materials, direct labor, and manufacturing overhead are accumulated in separate Work in
Process Inventory accounts⎯one for each manufacturing process.
• As units are transferred from one process to the next, the costs of those units are transferred from
one Work in Process Inventory account to the next.
• Costs flow into Finished Goods Inventory only from the Work in Process Inventory account for the
last manufacturing process.
Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall 171

(5 min.) S 5-2
Work in Process Inventory — Shells
Beginning Balance $ 18,500
Direct materials used 42,800
Direct labor 12,600
Manufacturing overhead allocated 17,700
Transferred in from Centers 126,300
Transferred to Packaging 196,800
Ending Balance $ 21,100
The ending balance of $21,100 represents the cost of making the partially completed jelly beans. This
includes the cost of making the jelly bean centers and includes the cost incurred so far on applying the shells.
(5 min.) S 5-3
Water Sport
Shaping Department
Equivalent Units
Equivalent Units
Direct Materials Conversion Costs
Flow of Production
Completed and transferred out during December 34,000 34,000
Ending work in process, Dec. 31 19,000a 6,650b
Total equivalent units 53,000 40,650
__________
a Direct materials are added at the beginning of the shaping
process. Thus, all 19,000 units in ending inventory are complete as to direct materials.
b19,000 units × 35% complete = 6,650 equivalent units.
The footnoted explanations are not required.

(5 min.) S 5-4
Millson Soda
Bottling Department
Flow of Physical Units
Flow of Physical Units
Units to account for:
Beginning work in process, June 1 21,000
Started in production during June 120,000
Total physical units to account for 141,000
Units accounted for:
Completed and transferred out
during June b113,000
Ending work in process, June 30 28,000

Total physical units accounted for a141,000
_________
a “Total physical units accounted for” must equal the “Total physical units to account for” (141,000) in the top
half of the schedule.

b Back into this figure by subtracting the 30,000 units in ending work in process inventory from the “Total
physical units to account for” (141,000).
(5 min.) S 5-5

Equivalent Units
Physical Units Direct Materials Conversion Costs
Completed and transferred out 113,000 a113,000 a113,000
Ending work in process, March 31 18,000 b0 c5,040
Total physical units accounted

for: 131,000
__________
a113,000 = 113,000 physical units × 100% complete
b 0 = 18,000 physical units × 0% complete (direct materials are
added at the end of the process)

c 5,040 = 18,000 physical units × 28% complete with respect to
conversion costs
(5 min.) S 5-6
1. The “units completed and transferred out” are completely finished in the Frying Department, otherwise they
would not have been transferred out to the Packaging Department.
1,100,000 × 100% of direct materials = 1,100,000 equivalent units of direct materials

1,100,000 × 100% of conversion costs = 1,100,000 equivalent units of conversion costs
2. All of the direct materials have been added, so they are 100% complete with respect to direct materials:
85,000 × 100% of direct materials = 85,000 equivalent units of direct materials
However, only 62% of the conversion had taken place, so
85,000 × 62% of conversion costs = 52,700 equivalent units of conversion costs
3. The total equivalent units for the month are calculated as follows:
Equivalent Units
Completed and transferred out during August 1,100,000 1,100,000
Ending work in process, Aug. 31 85,000 52,700
Total equivalent units 1,185,000 1,152,700

(5 min.) S 5-7
Romaine Company
Month Ended May 31
Direct Conversion Costs
Materials Total
Beginning Work in Process, May 1 $ 42,000 $ 21,000 $ 63,000
Costs added during May 101,000 a172,000 273,000
Total costs to account for $143,000 $193,000 $336,000
__________
a Conversion costs ($172,000) = direct labor ($14,000) +
manufacturing overhead ($154,000)

(5 min.) S 5-8
Mixing Department
Cost per Equivalent Unit
Total costs to account for $287,155 a$468,547
÷ Total equivalent units ÷ 52,210 ÷ 45,490

Cost per equivalent unit $ 5.50 $ 10.30
__________
a$468,547 of conversion costs = Total costs to account for
($755,702) − Direct materials ($287,155)
(5 min.) S 5-9
Water Sport
Shaping Department
Conversion Cost per Equivalent Unit
Conversion Costs
Beginning work in process, October 1 $ 0
Costs added during October 78,750a
Cost to account for $ 78,750
Divide by total equivalent units ÷ 40,650
Cost per equivalent unit $ 1.94
a
Direct labor………………………… $34,000
Manufacturing overhead………… 44,750
Total conversion costs………….. $78,750

(5-10 min.) S 5-10
1a.
Oscar company
Assignment of Costs
Assign costs: Direct Materials Conversion Costs Total
Completed and transferred out 370,000 x ($5.00 + $2.25) $2,682,500
1b.
Oscar Company
Assignment of Costs
Direct Conversion
Materials Costs Total
Ending work in process inventory:
Direct materials (74,000 × $5.00) = $ 370,000
Conversion costs (48,000 × $2.25) = 108,000
Total cost of ending work in process inventory $ 478,000
2. The total costs accounted for are $3,160,500.

3. Oscar’s cost of making one unit is $7.25.
(5 min.) S 5-11
1.
Work in Process Inventory — Forming Department
Direct labor 14,100
Manufacturing overhead allocated $126,000
Total costs to account for $271,400
2. The following journal entry records the transfer of costs out of the Forming Department and into the
Finishing department:
Journal Entry
Date Accounts Debit Credit
Work in Process Inventory—Finishing Department $243,300
Work in Process Inventory — Forming Department $243,300
243,800
243,800
3. After posting the journal entry in Req. 2, the Work in Process Inventory account for the Forming Department
appears as follows:
Work in Process Inventory — Forming Department
Direct labor 14,100
Transferred to Finishing 243,300
Ending Balance $ 28,100

(5-10 min.) S 5-12
1a.
Doyle Corp.
Assignment of Costs
Transferred-in
Assign costs Costs Direct Materials Conversion Costs Total
Completed and transferred out 73,000 x ($2.94 + $0.55 + $1.36) $354,050
1b.
Doyle Corp.
Assignment of Costs
Transferred-in
Assign costs Costs Direct Materials Conversion Costs Total
Ending work in process
inventory:
Transferred-in costs 9,500 x $2.94 $ 27,930
Direct materials 8,200 x $0.55 4,510
Conversion costs 3,500 x $1.36 4,760
Total cost of ending work in
process inventory $ 37,200
2. The “Total costs accounted for” is $391,250.

The “Total costs accounted for” figure must match the “Total costs to account for” figure.
In other words, the company must assign all of the costs that were in the Work in Process account during the
period to either (1) the units that were completed and transferred out during the period, or (2) to the units that
are still in ending work in process inventory at the end of the period.
3) Doyle Corp.’s cost of making each unit is $4.85.
(5-10 min) S 5-13
1. Kormic Co.’s cost per square foot of making one unit is $4.70.
2. Most of the cost of producing the countertops occurred in the Forming Department.
The transferred-in costs of $2.94 represent the bulk of the cost incurred per unit.
3. Sales price per square foot $12.50
Less: Cost per square foot (4.70)
Gross profit per square foot $ 7.80
4. Square feet sold 140,000

Gross profit per square foot × $7.80
Total gross profit $1,092,000

(10 min.) S 5-14
Req. 1
Direct labor + Manufacturing overhead = Conversion costs
$27,200 + $38,0505 = $65,250
Req. 2
Total filtration costs / Total number of liters = Average filtration cost per liter
$213,750 / 225,000 = $0.95
Req. 3
If only 150,000 liters were completely filtered and ozonated, the remaining 75,000 were incomplete, the cost of
a completely filtered and ozonated liter would be more the average filtration cost per liter calculated in
Requirement 2. This is because a decrease in the denominator of the formula will result in a greater cost per
liter.
(10 min.) S 5-15
Req. 1
Filtration Process
............ Conversion costs added evenly throughout process
Direct materials
(water) Transferred
added out to
Bottling Dep’t
Start 90% 100%

Complete
150,000 liters completed and transferred out

to bottling process
75,000 liters started but not finished

(ending work in process inventory)

(continued) S 5-15
Req. 2
Cold Spring
Filtration Department
Flow of Physical Units and Computation of Equivalent Units
Equivalent Units
Flow of Physical Conversion

Flow of Production Units Direct Materials Costs
Beginning work in process, February 1 0
Started in production during February 225,000
Completed and transferred out during February 150,000 150,000 150,000
Ending work in process, February 28 75,000 a75,000 b67,500
Total physical units accounted for 225,000

Equivalent Units 225,000 217,500
__________
a The ending inventory is 90% of the way through the filtration
process, so it has passed the point where water is added. The

ending inventory therefore has 75,000 equivalent units of
water (direct materials).
b75,000 units × 90% complete as to conversion work = 67,500
equivalent units.
(5 min.) S 5-16
Cold Springs
Flow of Production Direct Materials Conversion Costs
Beginning work in process, February 1 $ 0 $ 0
Costs added during February 148,500 65,250
Total Costs to account for $ 148,500 $ 65,250a
Divide by total equivalent units ÷ 225,000 ÷ 217,500
__________
a $12,800 + $14,400 + 38,050 of wages and manufacturing
overhead

(10 min.) S 5-17
Reqs. 1 and 2
Cold Springs
Assignment of Costs
Assign costs Total
Completed and transferred out 150,000 x ($0.66 + $0.33) $144,000
Direct materials 75,000 × $0.66 49,500
Conversion costs 67,500 × $0.30 20,250
process inventory 69,750
Total costs accounted for $213,750
(continues S 5-17) (5 min.) S 5-18
Req. 1
Journal
POST.
DATE ACCOUNTS AND EXPLANATIONS REF. DEBIT CREDIT
Work in Process Inventory—Bottling 144,000
Work in Process Inventory—Filtration 144,000
Req. 2
Work in Process Inventory−Filtration
Bal. February 1 0 Transferred to Bottling 144,000
Direct materials 148,500
Direct labor 27,200
Manufacturing overhead 38,050
Bal., February 28 69,750

(15 min.) S 5-19
Req. 1
Conversion costs added evenly throughout the process
Transferred Transferred
in from Direct out to
Filtration materials Finished
added Goods
Start 80% 100 %

Complete
153,000 liters completed
2,000 liters incomplete
Req. 2
Costs in beginning work Costs added
in process inventory during February
Transferred in $ 750 Transferred in* $131,000
Direct materials 0 Direct materials 32,130
Direct labor 630 Direct labor 33,300
Manufacturing overhead 2,478 Manufacturing overhead 22,340
Total beginning work in process Total costs added during February
inventory as of Feb. 1 $3,858 $218,770
*The Filtration Department completed and transferred out 150,000 liters at a total cost of $131,000.

(continued) S 5-19
Cold Springs
Bottling Department
Flow of Equivalent Units
Physical Units Trans-ferred- Direct Conversion
Flow of Production In Materials Costs
Beginning work in process Feb.1 5,000
Transferred in 150,000
Completed and transferred
out during February 153,000 153,000 153,000 153,000
Ending work in process, Feb. 28 2,000 2,000a 0b 1,600c
Total equivalent units 155,000 153,000 154,600
__________
aTransferred-in costs are added at the beginning of the bottling process. The time line shows that the 2,000
units in ending work in process inventory have all passed this point of the bottling process, so there are
2,000 equivalent units of transferred-in costs.
bThe time line shows that direct materials are not added until the end of the bottling process. The ending
inventory has not made it to the point where the materials are added, so the ending inventory contains no
direct materials.
c2,000 × 80% = 1,600
The flow of physical units column and the footnoted explanations are not required. They are provided to help
instructors explain the computations.
(5-10 min.) S 5-20
Fresh Springs
Bottling Department
Transferred Direct Conversion
In Materials Costs Total
Beginning work in process,
February 1 $ 750 $ 0 $ 3,108 $ 3,858
Costs added during February 131,000 32,130 55,640a 218,770
Total costs to account for $131,750 $32,130 $58,748 $222,628
Divide by total equivalent
units ÷ 155,000 ÷ 153,000 ÷ 154,600
Cost per equivalent unit $ 0.85 $ 0.21 $ 0.38
__________
a $33,300 of direct labor + $22,340 of manufacturing overhead =
$55,640

(10 min.) S 5-21
Fresh Springs
Bottling Department
Assignment of Costs
Conversion
Assign costs: Transferred In Direct Materials Costs Total Costs
Completed and transferred out 153,000 x ($0.85 + $0.21 + $0.38) $ 220,320
Transferred-in costs 2,000 x $0.85 1,700
Direct materials 0 x $0.21 0
Conversion costs 1,600 x $0.38 608
Total ending work in process
inventory 2,308
(5 min.) S 5-22
Req. 1
Journal
POST.
DATE ACCOUNTS REF. DEBIT CREDIT
Finished Goods Inventory 220,320
Work in Process Inventory—Bottling 220,320
Req. 2
Work in Process Inventory—Bottling
Bal., February 1 3,858 Transferred to Finished
Transferred in from Filtering
131,000 Goods Inventory 220,320
Direct labor 33,300
Bal. February 28 2,308

Exercises (Group A)
(10-15 min.) E 5-23A
(15-20 min) E 5-24A
Reqs. 1 and 2
Raw Materials Inventory
Beginning Balance 23,900
Direct materials purchased 173,000
Direct materials used in Mixing 155,000
Direct materials used in Packaging 32,000
Ending Balance 9,000
Work in Process Inventory — Mixing Department

Direct labor 11,500
Transferred to Baking 226,000

(continued) E 5-24A
Work in Process Inventory — Baking Department
Direct labor 4,700
Transferred in from Mixing 226,000
Work in Process Inventory — Packaging Department

Direct labor 8,400
Transferred in from Baking 301,000
Transferred to Finished Goods 346,500
Finished Goods Inventory

Transferred in from Packaging 346,500
Cost of Goods Sold 347,500
Req. 3
Total cost assigned to loaves transferred to Finished Goods $ 346,500

Divided by: Completed and transferred out units ÷ 3,150,000
Cost per unit $ 0.11
(10-15 min.) E 5-25A
Stacy’s Strawberry Pies

Equivalent Units
Flow of Physical
Units Direct Materials Conversion Costs
Beginning work in process, April 1 205,000
Started in production during April 1,025,000
Total physical units to account for 1,230,000
Completed and transferred out during June b1,075,000 1,075,000 1,075,000
Ending work in process, April 30 155,000 c108,500 d139,500
Total physical units accounted for a1,230,000
Total Equivalent Units 1,183,500 1,214,500

__________
a “Total physical units accounted for” must equal the “Total physical units to account for” (1,230,000) in the top
half of the schedule

b Back into this figure by subtracting the 155,000 units in ending work in
process inventory from the “Total physical units to account for” (1,230,000)
(continued) E 5-25A
c 108,500 = 155,000 × 70%
d 139,500 = 155,000 × 90%
(10-15 min.) E 5-26A
Note: Students may have filled out the chart, or they may have just given an answer for each lettered item.
Solutions are shown both ways.
Equivalent Units
Physical Units Transferred–in Direct Materials Conversion Costs
Beginning work in process 27,000
Transferred-in during May 226,000
Total units to account for 253,000

Completed and transferred out 221,000 221,000 221,000 221,000
Ending work in process 32,000 32,000 22,400 12,800
Total units accounted for: 253,000
Total Equivalent Units 253,000 243,000 233,800
a. 253,000 (= 27,000 + 226,000)

b. 221,000 (= 253,000 (a) − 32,000)
c. 253,000 (must equal the 253,000 found in part a)
d. 221,000 (= 221,000 × 100% complete)
e. 32,000 (= 32,000 × 100% complete)
f. 253,000 (= 221,000 (d) + 32,000 (e))
g. 221,000 (= 221,000 × 100% complete)
h. 22,400 (= 32,000 × 70% complete)
i. 243,400 (= 221,000 (g) + 22,400 (h))
j. 221,000 (= 221,000 × 100% complete)
k. 12,800 (= 32,000 × 40% complete)
l. 233,800 (= 221,000 (j) + 12,800 (k))

(20 min.) E 5-27A
Req. 1
Direct materials
(dyes) Transferred
added out to
Packaging
Start 30% 100%

Completion
6,600 gallons completed and transferred out
2,600 gallons started

but not finished
(ending work in
process inventory)
Req. 2
Paint by Number
Blending Department
Physical Direct Conversion
Flow of Production Units Materials Costs
Beginning work in process, May 1 0
Started in production during May 9,200
Completed and transferred out during May 6,600 6,600 6,600
Ending work in process, May 31 2,600 2,600a 780b
__________
a The time line shows that all direct materials are added at the
beginning of the blending process, so the ending work in

process inventory is complete as to materials.
b 2,600 units × 30% = 780 equivalent units

(continued) E 5-27A
Req. 3
Paint by Number
Blending Department

Cost per Equivalent Unit: Total
Beginning work in process, May 1 $ 0 $ 0 $ 0
Costs added during May 5,980 2,583c 8,563
Divide by total equivalent units (from Req. 2) ÷ 9,200 ÷ 7,380
__________
c$800 + $1,840 = $2,583
Req. 4
Paint by Number
Blending Department
Assignment of Costs
Assign Costs: Total
(a) Completed and transferred out (6,600 x ($0.65 + $0.35) $6,600
Conversion costs 780 × $0.35 273
(b)Total ending work in process
inventory, May 31 1,963
Req. 5
The average cost per gallon transferred out of blending is:
$6,600
= $1.00 per gallon
6,600 gallons
Managers will want to know this cost to compare it to their budgeted target costs. They may also use the cost
information when setting selling prices.

(continues E 5-27A) (15 min.) E 5-28A
Req. 1
Note: Students may prepare 3 separate journal entries or one summary entry (as shown below) to record the
three manufacturing costs.
Journal
POST.
Work in Process Inventory—Blending 8,563
Raw Materials Inventory 5,980
Wages Payable 850
Manufacturing Overhead 1,733
Work in Process Inventory—Packaging 6,600

(from Req. 4 of E 5-27A)
Req. 2
Work in Process Inventory—Blending
Bal. May 1 0 Transferred to Packaging 6,600
Direct labor 850
Bal. May 31 1,963
(15-20 min.) E 5-29A
Journal
POST.
a. Raw Materials Inventory 9,100
Accounts Payable 9,000
b. Work in Process Inventory—Assembly 4,100

Work in Process Inventory—Finishing 2,600

c. Manufacturing Wages 10,600

Cash 10,600
d. Manufacturing Overhead 11,100

Property Taxes Payable—Plant 1,600
Utilities Payable 4,800
Prepaid Insurance—Plant 1,000
Accumulated Depreciation—Plant 3,700

(continued) E 5-29A
e. Work in Process Inventory—Assembly 7,200

Manufacturing Wages 5,100
f. Work in Process Inventory—Finishing 10,800

g. Work in Process Inventory—Finishing 10,350

Work in Process Inventory—Assembly 10,350
h. Finished Goods Inventory 15,100

(25-30 min.) E 5-30A
Req. 1
Value Surge Protectors
Assembly Department
Completed and transferred out during
September 19,000 19,000 19,000
Ending work in process, Sept. 30 6,000 a 2,160 4,200b
__________
a6,000 × 0.36
b6,000 × 0.70
Req. 2
Value Surge Protectors
Assembly Department
Cost Per Equivalent Unit
September 1 $ 0 $ 0
Costs added during September 11,638 32,480
Costs to account for $ 11,638 $ 32,480
Divide by total equivalent units
(from Req. 1) ÷ 21,160 ÷ 23,200

(continued) E 5-30A
Req. 3
Zap Surge Protectors
Assembly Department
Assignment of Costs
Direct Conversion Cost
Costs Assigned Materials Total
Completed and transferred out 19,000 × ($0.55 + $1.40) $37,050
Req. 4
Journal
POST.
Work in Process Inventory—Testing 37,050
Req. 5
Work in Process Inventory—Assembly
Bal. September 1 0 Transferred to Testing 37,050
Conversion costs 32,480
Bal. September 30 7,068
(20 min.) E 5-31A
Req. 1
Direct Transferred
materials out to
added Packaging
Start 80% 100%

Completion
1,700 gallons started but not finished


(continued) E 5-31A
Req. 2
Samson Winery
Fermenting Department
Units Materials Costs
Beginning work in process, March 1 2,200
Started in production during March 5,980
during March 6,480 6,480 6,480
Ending work in process, March 31 1,700 1,700a 1,360b
__________
aThe time line shows that all direct materials are added at the beginning of the process, so the ending work in

b1,360 units × 80% = 1,700
Footnoted explanations are not required.
Req. 3
Samson Winery
Direct Materials Conversion Costs Total
Beginning work in process, March 1
$ 2,300 $2,376 $ 4,676
Costs added during March 9,970 3,112c 13,082
Costs to account for $12,270 $5,488 $17,758
Divide by total equivalent units (from
Req. 2) ÷ 8,180 ÷ 7,840
__________
c $900 + $2,212 = $3,112

(continued) E 5-31A
Req. 4
Samson Winery
Assignment of Costs
Materials Total
(a) Units completed and
transferred out 6,480 × ($1.50 + $0.70) $14,256.00
Ending work in process,

March 31:
Direct materials 1,700 × $1.50 2,550.00
Conversion costs 1,360 × $0.70 952.00
(b)Total ending work
In process March 31 3,502.00
Total costs accounted for $17,758.00
Req. 5
The average cost per gallon transferred out of Fermenting is:
$14,256
= $2.20 per gallon
6,480 gallons
(15 min.) E 5-32A

Reqs. 1 - 3
Option #1
# of tons Cost per Monthly cost Annual
ton (x 12 mos.)
Material cost of machine drool 150 $75 $11,250 $135,000
Disposal cost 150 $75 $8,250 $99,000
$19,500 $234,000
Option #2
ton (x 12 mos.)
Receive from local recycler 150 $10 $1,500 $18,000
Waste disposal charges saved 150 $55 $8,250 $99,000
$9,750 $117,000

(continued) E 5-32A
Option #3
ton (x 12 mos.)
Reduction in plastics cost 75 $75 $ 5,625 $ 67,500
Reduction in hauling* 150 $55 $ 8,250 $ 99,000
Receive from local recycler 75 $10 $ 750 $ 9,000
Less annual cost to re-engineer
0 ($50,000)
$13.875 $125,500
*50% reduction in waste, remaining goes to local recycler
Req. 4
Student answers will vary.
(15-20 min.) E 5-33A
Paulson Roping
Forming Department
Physical Flow of Units and Equivalent Units
Equivalent Units
Flow of Physical
Units
Beginning work in process, October 1 10,250
Started in production during October 74,150
October a76,000 76,000 76,000
Ending work in process, October 31 8,400 b5,040 c1,680

Total Equivalent Units 81,040 77,680
__________
a 84,400 physical units to account for minus the 8,400 still in ending work in process inventory = 76,000 that
must have been transferred out.

b 8,400 × 60% = 5,040
c 8,400 × 20% = 1,680
Paulson Roping
Forming Department
Beginning work in process, October 1 $ 21,410 $ 16,464 $ 37,874
Costs added during October 189,294 162,200 351,494

(continued) E 5-33A
Paulson Roping
Forming Department
Assignment of Costs
Direct Materials Conversion Cost Total

Units completed and
transferred out 76,000 × ($2.60 + $2.30) $372,400
Ending work in process inventory
inventory, October 31 16,968
Journal
POST.
Work in Process Inventory—Forming 372,400
(15-20 mins.) E 5-34A
Jane’s Fudge
Mixing Department
Physical Units Transferred In Direct Materials Conversion
Flow of Production Costs
Beginning work in process, May 1 21,000
Transferred in during May 76,000
during May 86,000 86,000 86,000 80,600
Ending work in process, May
31 11,000 11,000 7,700a 1,100b
__________
a Direct materials: 11,000 units × 0.70 = 7,700
b Conversion costs: 11,000 units × 0.20 = 1,100
(Because the Mixing Department has 76,000 units transferred in, mixing
cannot be the first process. Thus, the Mixing Department must account
for transferred in costs.)

(continued) E 5-34A
Jane’s Fudge
Heating Department
Flow of Production Physical Units Transferred In Direct Materials Conversion Costs
Completed and
transferred out
during May: 77,000 77,000 77,000 77,000
Ending work in process, May 31 16,000 16,000 8,800a 7,200b
__________
(15-20 mins.) E 5-35A

Req. 1
Hamstein Semiconductors
Photolithography Department
Flow of Production Physical Units Transferred In Direct Conversion
Materials Costs
December 1 7,000
Transferred in during December 29,000
during December 25,000a 25,000 25,000 25,000
December 31 11,000 11,000 11,000b 7,700c
Total physical units
accounted for 36,000
__________
a. 35,000 total units – 9,000 units in ending work in process = 25,000 units
b Direct materials: 11,000 units each 100% completed in December
= 11,000
c Conversion costs: 11,000 units each 70% completed in December
= 7,700

(continued) E 5-35A
Req. 2
Transferred Direct Conversion
In Materials Costs Total
December 1 $ 21,500 $20,300 $ 23,756 $ 65,550
Costs added during December 97,300 69,700 90,700 257,700

Divide by total equivalent units (from Req.1)
÷ 36,000 ÷ 36,000 ÷ 32,700
Req. 3
Assignment of Costs
Assignment of total costs: TransferredIn Direct Materials Conversion Costs
Costs Total
transferred out to
Finished Goods
25,000 × ($3.30 + $2.50 + $3.50) $232,500
Inventory
Ending work in process, inventory,

Dec. 31:
Transferred in costs 11,000 × $3.30 $ 36,300
(b) Total ending work in
process, December 31 $ 90,750

Exercises (Group B)
(10-15 min) E 5-36B
(15-20 min.) E 5-37B

Reqs. 1 and 2

Direct materials purchased 170,000
Direct materials used in Mixing 150,000
Direct materials used in Packaging 31,000

(continued) E 5-37B
Work in Process Inventory — Mixing Department
Direct labor 11,500
Transferred to Baking 223,000
Work in Process Inventory — Baking Department

Direct labor 4,100
Transferred in from Mixing 223,000
Work in Process Inventory — Packaging Department

Direct labor 8,700
Transferred in from Baking 306,000
Transferred to Finished Goods 320,000
Finished Goods Inventory

Transferred in from Packaging 320,000
Cost of Goods Sold 323,000
Req. 3
The cost per loaf of bread is calculated as follows:
Total cost of units transferred to Finished Goods $ 320,000
Divided by: Completed and transferred out units ÷ 3,200,000
Cost per unit $ 0.10

(10-15 min.) E 5-38B
Patty’s Pumpkin Pies

Equivalent Units
Flow of Physical
Units Direct Materials Conversion Costs
Beginning work in process, Sept. 1 209,000
Started in production during Sept. 990,000
Total physical units to account for 1,199,000
Completed and transferred out during Sept. b1,040,000 1,040,000 1,040,000
Ending work in process, Sept. 30 159,000 c119,250 d135,150
Total physical units accounted for a1,199,000

Total Equivalent Units 1,159,250 1,175,150
__________
a “Total physical units accounted for” must equal the “Total physical units to account for” (1,199,000) in the top
half of the schedule

b Back into this figure by subtracting the 159,000 units in ending work in process inventory from the “Total
physical units to account for” (1,199,000)

c 119,250 = 159,000 × 75%
d 135,150 = 159,000 × 85%
(10-15 min.) E 5-39B

Note: Students may have filled out the chart, or they may have just given an answer for each lettered item.
Solutions are shown both ways.
Equivalent Units
Conversion
Physical Units Transferred–in Direct Materials
Costs
Beginning work in process 27,000
Transferred-in during May 231,000
Total units to account for 258,000

Ending work in process 32,000 32,000 28,800 19,200
Total units accounted for: 258,000
Total Equivalent Units 258,000 254,800 245,200

(continued) E 5-39B
a. 252,000 (= 23,000 + 229,000)

b. 224,000 (= 252,000 (c) − 28,000)
c. 252,000 (must equal the 252,000 found in part a)
d. 224,000 (= 224,000 × 100% complete)
e. 28,000 (= 28,000 × 100% complete)
f. 252,000 (= 224,000 (d) + 28,000 (e))
g. 224,000 (= 224,000 × 100% complete)
h. 25,200 (= 28,000 × 90% complete)
i. 249,200 (= 224,000 (g) + 25,200 (h))
j. 224,000 (= 224,000 × 100% complete)
k. 16,800 (= 28,000 × 60% complete)
l. 240,800 (= 224,000 (j) + 16,800 (k))
(20 min.) E 5-40B
Req. 1
Direct materials
(dyes) Transferred
added out to
Packaging
Start 30% 100%

Complete
2,500 gallons incomplete

(continued) E 5-40B
Req. 2
Step-by-Step Painting
Blending Department
Beginning work in process, May 1 0
Started in production during May 9,000
Completed and transferred out during May 6,500 6,500 6,500
Ending work in process, May 31 2,500 2,500a 750b
__________
a The time line shows that all direct materials are added at the beginning of the blending process, so the
ending work in process inventory is complete as to materials.

b 2,500 units × 30% = 750 equivalent units
Req. 3
Blending Department

Cost per Equivalent Unit: Total
Beginning work in process, May 1 $ 0 $ 0 $ 0
Costs added during May 5,670 2,900 $8,570
Divide by total equivalent units (from Req. 2) ÷ 9,000 ÷ 7,250
__________
c$800 + $2,100 = $2,900

(continued) E 5-40B
Req. 4
Blending Department
Assignment of Costs
Assign Costs: Total
(a) Completed and transferred out (6,500 x ($0.63 + $0.40) $6,695
(b)Total ending work in process
inventory, May 31 1,875
Req. 5
The average cost per gallon transferred out of blending is:
$6,695
= $1.03 per gallon
6,500 gallons
(15 min.) E 5-41B
Req. 1
Note: Students may prepare 3 separate journal entries or one summary entry (as shown below) to record the
three manufacturing costs.
Journal
POST.
Wages Payable 800
Work in Process Inventory—Packaging 6,695

(from Req. 4 of E 5-40B)

(continued) E 5-41B
Req. 2
Work in Process Inventory—Blending

Bal. May 1 0 Transferred to Packaging 6,695
Direct labor 800
Bal. May 31 1,875
(15-20 min.) E 5-42B
Journal
POST.
a. Raw Materials Inventory 9,500
Accounts Payable 9,500
b. Work in Process Inventory—Assembly 4,000


c. Manufacturing Wages 10,600

Cash 10,600
d. Manufacturing Overhead 10,400

Property Taxes Payable—Plant 1,900
Utilities Payable 4,100
Prepaid Insurance—Plant 1,000
Accumulated Depreciation—Plant 3,400
e. Work in Process Inventory—Assembly 7,600

f. Work in Process Inventory—Finishing 10,600

g. Work in Process Inventory—Finishing 10,250

h. Finished Goods Inventory 15,700


(25-30 min.) E 5-43B
Req. 1
Zip Surge Protectors
Assembly Department
Completed and transferred out during September 15,000 15,000 15,000
Ending work in process, Sept. 30 8,000 a 3,000 6,400b
__________
a8,000 × 0.375
b8,000 × 0.80
Req. 2
Assembly Department
Cost Per Equivalent Unit
September 1 $ 0 $ 0
Costs added during September 9,900 29,960
(from Req. 1) ÷ 18,000 ÷ 21,400

(continued) E 5-43B
Req. 3
Assembly Department
Assignment of Costs
Direct Conversion Cost
Costs Assigned Materials Total
Completed and transferred out 15,000 × ($0.55 + $1.40) $29,250
inventory 10,610
Req. 4
Journal
POST.
Work in Process Inventory—Testing 29,250
Req. 5
Work in Process Inventory—Assembly
Bal. September 1 0 Transferred to Testing 29,250
Conversion costs 29,960
Bal. September 30 10,610
(20 min.) E 5-44B
Req. 1
Direct Transferred
materials (grapes) out to
added Packaging
Start 80% 100%

Complete


(continued) E 5-44B
Req. 2
Shelton Winery
Beginning work in process, March 1 3,000
Started in production during March 4,840
during March 6,490 6,490 6,490
Ending work in process, March 31 1,350 1,350a 1,080b
__________
aThe time line shows that all direct materials are added at the beginning of the process, so the ending work in

b1,350 units × 80% = 1,080
Footnoted explanations are not required.
Req. 3
Shelton Winery
$ 2,000 $3,615 $ 5,615
Costs added during March 8,192 3,198c 11,390
Costs to account for $10,192 $6,813 $17,005
Divide by total equivalent units (from
Req. 2) ÷ 7,840 ÷ 7,570
__________
c $1,050 + $1,148 = $3,198

(continued) E 5-44B
Req. 4
Shelton Winery
Assignment of Costs
Materials Total
transferred out 6,490 × ($1.30 + $0.90) $14,278

March 31:
Conversion costs 1,080 × $0.90 972
(b)Total ending work
In process March 31 2,727
Req. 5
The average cost per gallon transferred out of Fermenting is:
$14,278
= $2.20 per gallon
6,490 gallons
(15 min.) E 5-45B

Reqs. 1- 3
Option #1
ton (x 12 mos.)
Material cost of machine drool 300 $95 $28,500 $342,000
Disposal cost 300 $65 $19,500 $234,000
$48,000 $576,000
Option #2
ton (x 12 mos.)
Receive from local recycler 300 $20 $6,000 $72,000
Waste disposal charges saved 300 $65 $19,500 $234,000
$25,500 $306,000

(continued) E 5-45B
Option #3
ton (x 12 mos.)
Reduction in plastics cost 150 $95 $14,250 $171,000
Reduction in hauling* 300 $65 $19,500 $234,000
Receive from local recycler 150 $20 $ 3,000 $ 36,000
Less annual cost to re-engineer
0 (120,000)
$33.750 $321,000
*50% reduction in waste, remaining goes to local recycler
Req. 4
Student answers will vary.

(15-20 min.) E 5-46B
Cleveland Roping
Forming Department
Physical Flow of Units and Equivalent Units
Equivalent Units
Flow of Physical
Units
Beginning work in process, October 1 10,450
Started in production during October 69,350
Completed and transferred out during October a71,000 71,000 71,000
Ending work in process, October 31 8,800 b5,280 c1,760

Total Equivalent Units 76,280 72,760
__________
a 79,800 physical units to account for minus the 8,800 still in ending work in process inventory = 71,000 that
must have been transferred out.

b 8,800 × 60% = 5,280
c 8,800 × 20% = 1,760
Cleveland Roping
Forming Department
Beginning work in process, October 1 $ 21,490 $ 41,128 $ 62,618
Costs added during October 214,978 162,600 377,578

(continued) E 5-46B
Cleveland Roping
Forming Department
Assignment of Costs
Direct Materials Conversion Cost Total

Units completed and
transferred out 71,000 × ($3.10 + $2.80) $418,900
October 31:
Total ending work in process,
October 31: 21,296
Journal
POST.
Work in Process Inventory—Forming 418,900
(15-20 mins.) E 5-47B
Karen’s Fudge
Mixing Department
Flow of Production Physical Units Transferred In Direct Materials Conversion Costs
May 1 22,000
May 83,000 83,000 83,000 83,000
Ending work in process, May 31 12,000 12,000 9,600 a 1,200b
__________
(Because the Mixing Department has 73,000 units transferred in, mixing cannot be the first process. Thus,
the Mixing Department must account for transferred in costs.)

(continued) E 5-47B
Karen’s Fudge
Heating Department
Physical Units Transferred In Direct Materials Conversion
Completed and
transferred out
during May: 78,000 78,000 78,000 78,000
Ending work in process, May 31 10,000 10,000 7,500a 6,500b
__________
(15-20 mins.) E 5-48B
Req. 1
Brookman Semiconductors
Flow of Production Physical Units Transferred In Direct Conversion
Materials Costs
December 1 5,000
Transferred in during December 22,000
during
December 19,000a 19,000 19,000 19,000
December 31 8,000 8,000 8,000b 5,600c
accounted for 27,500
__________
a 27,000 total units – 9,000 units in ending work in process = 19,000 units
b Direct materials: 8,000 units each 100% completed in December = 8,000
c Conversion costs: 8,000 units each 70% completed in December = 5,600

(continued) E 5-48B
Req. 2
Transferred Direct Materials Conversion
In Costs Total
December 1 $ 21,900 $20,700 $ 5,540 $ 48,190
Costs added during December 96,900 57,550 90,400 244,850

Total costs to account for $118,800 $78,300 $ 95,940 $293,040
Divide by total equivalent units (from Req.1)
÷ 27,000 ÷ 27,000 ÷ 24,600
Req. 3
Assignment of Costs
TransferredIn Costs Direct Materials Conversion Costs
Total
transferred out to
Finished Goods
19,000 × ($4.40 + $2.90 + $3.90) $212,800
Inventory

December 31:
Transferred in costs 8,000 × $4.40 $ 35,200
(b) Total ending work in
process, December 31 $ 80,240

Problems (Group A)
(30-45 min.) P 5-49A
Req. 1
Direct
materials
added
Start 40% 100%

Complete
15,200 units completed and transferred out
5,300 units incomplete

(ending work in
process inventory)
Req. 2
Great Lips
Lip Balm Department
Equivalent Unit Computation
Month Ended June 30
Flow of Production Physical Units Direct Materials Conversion Costs
Completed and
transferred out 15,200 15,200 15,200
Ending work in process, June 30 5,300 5,300 2,120a
__________
a 5,300 × 0.40

(continued) P 5-49A
Great Lips
Lip Balm Department
Month Ended June 30
Cost per Equivalent Unit: Direct Materials Conversion Costs
Beginning work in process June 1 $ 0 $ 0
Costs added during June 4,305 4,330*
__________
*$3,410 + $920 = $4,330
Req. 3
Great Lips
Lip Balm Department
Cost Assignment
Month Ended June 30
Total
(a) Units completed and transferred
out 15,200 × ($0.21 + $0.25) $6,992
Ending work in process, June 30:

(b) Total cost of ending work in
process, June 30 1,643
Total cost accounted for $8,635
Req. 4
Work in Process Inventory

Bal. June 1 0 Transferred out 6,992
Direct labor 3,410
Manufacturing overhead 920
Bal. June 30 1,643

(30-45 min.) P 5-50A
Req. 1
Direct
materials
added
Start 70% 100%

Completion

(ending work in
process inventory)
Req. 2
Pennsylvania Furniture Company

Sawing Department
Month Ended September 30
Physical Units Direct Materials Conversion
14,000 14,000 14,000

Ending work in process, Sept. 30
2,500 2,500 1,750a

Total physical units accounted for
16,500
__________
a 2,500 × 0.70

(continued) P 5-50A
Pennsylvania Furniture Company

Sawing Department
Cost per Equivalent Unit: Direct Materials Conversion Costs Total
Beginning work in process September

1
$ 0 $ 0 $ 0
Costs added during September 1,848,000 315,000b $2,163,000
Total costs to account for $1,848,000 $315,000 $2,163,000
Cost per equivalent unit $ 112 $ 20
__________
b $142,000 + $173,000 = $315,000
Req. 3
New England Furniture Company
Sawing Department
Cost Assignment
Total
Units completed and transferred
out 14,000 × ($112 + $20) $1,848,000
Ending work in process, Sept. 30:
Direct materials 2,500 × $112 280,000
Conversion costs 1,750 × $20 35,000
process, Sept. 30 315,000
Tototal costs accounted for $2,163,000
Total cost accumulated in the Sawing Department during September are the same as the Total Costs to
account for shown in Req. 2:
Direct materials…………………………... $1,848,000

Direct labor………………………………... 142,000
Manufacturing overhead………………... 173,000
Total costs………………………………… $2,163,000

(continued) P 5-50A
Req. 4
Journal Entry
POST.
DATE ACCOUNT TITLE AND EXPLANATION REF. DEBIT CREDIT
Work in Process Inventory—Sawing 2,163,000
Raw Materials Inventory 1,848,000
Wages Payable 142,000
Work in Process Inventory—Assembly 1,848,000

Note: Students may prepare three separate journal entry or the one summary journal entry (as shown above)
to record the three manufacturing costs.
(30-40 min.) P 5-51A
Req. 1
Chicken and Green

cream peppers and
added mushrooms
added
Start 60% 100%

Complete
700 gallons incomplete


(continued) P 5-51A
Req. 2
Tasty Chicken
Mixing Department
Physical Chicken, Green Peppers, Conversion
Flow of Production Units Cream Mushrooms Costs
November 1 0
Started in production 14,300
November 30 700 700a 0a 420b
__________
a The time line shows that chicken and cream are added at the beginning of the process. Green peppers and
mushrooms are not added until the end of the process. The ending inventory that is 60% of the way through
the production process has passed the point where the chicken and cream are added (but not the point where
the green peppers and mushrooms are added). The ending inventory is complete with respect to chicken and
cream, but it has no equivalent units of green peppers and mushrooms.
b 700 × 60% = 420
Req. 3
Tasty Chicken
Mixing Department
Month Ended November 30
Green Peppers and
Cost per Equivalent Unit: Chicken and Cream Mushrooms Conversion Costs
Beginning work in process $ 0 $ 0 $ 0
Costs added during Nov. $25,740c $ 5,440 $21,030d
Costs to account for $25,740 $ 5,440 $21,030
Divide by total equivalent units ÷ 14,300 ÷ 13,600 ÷ 14,020
__________
c$21,340 + $4,400 = $25,740
d$11,200 + $9,830 = $21,030

(continued) P 5-51A
Req. 4
Tasty Chicken
Mixing Department
Cost Assignment
Green Peppers
Chicken and Conversion
and Cream Mushrooms Costs Total
transferred out 13,600 × ($1.80 + $0.40 + $1.50) $50,320
Chicken and cream 700 × $1.80 1,260
Green peppers and mushrooms 0 x $0.40 0
(b) Total ending work in process
inventory 1,890
(45-60 min.) P 5-52A
Req. 1
Transferred Direct
in from materials
Shaping added
Start 50% 100%

Complete
2,100 racks completed and transferred out
1,500 racks started,

but not completed (ending
work in process inventory)

(continued) P 5-52A
Req. 2
Chrome Accessories
Plating Department
Equivalent Unit Computations (Weighted-Average)
Physical Transferred Direct Materials Conversion
Flow of Production Units In Costs
during March 2,100 2,100 2,100 2,100
Ending work in process, March 31 1,500 1,500a 0b 750c
accounted for 3,600
__________
a The time line shows that transferred-in costs are incurred at
the beginning of the plating process. Ending inventory was started this period, so it did pass the point where
transferred-in costs are added. The ending inventory is therefore complete with respect to transferred-in
costs.
b The time line shows that direct materials are not added until the end of the plating process. The ending
inventory is only 50% of the way through the plating process, so it has not yet incurred any plating direct
materials costs.
c 50% of the conversion work on the ending work in process inventory was done in March:
1,500 × 50% = 750
The explanations in the footnotes are not required.
Chrome Accessories
Plating Department
Production Cost Report
Month Ended March 31
Transferred In Direct Materials Conversion Costs Total
March 1 $21,600 $ 0 $13,750 $ 35,350
Costs added during March 43,200 25,200 57,500 125,900
Divide by equivalent units ÷ 3,600 ÷ 2,100 ÷ 2,850
Cost per equivalent unit $ 18 $ 12 $ 25

(continued) P 5-52A
Chrome Accessories
Plating Department
Production Cost Report (Weighted-Average Method)
Assignment of total costs:
2,200 × ($15 + $11 + $24) $115,000
Transferred-in costs 1,500 × $18 27,000
Direct materials 0 x $12 0
Conversion costs 750 × $25 18,750
Total ending work in process 45,750
inventory
Req. 3
Journal Entry
POST.
Work in Process Inventory—Plating 43,200
Work in Process Inventory—Shaping 43,200
To transfer in costs from Shaping
Department.

To record direct materials, direct labor,
and manuf. costs to the Plating
Department.

To record cost of units completed and
transferred out.
Note: Students may have prepared three separate journal entries, rather than the one summary entry shown
above, to record the three manufacturing costs incurred in the Plating Department.
(40-50 min.) P 5-53A

Req. 1
Transferred
in from
Molding
Start 20% 100%

Complete
17,000 units
started but
not completed
(ending work
in process
inventory)
Req. 2
Hamstein
Drying Department
Equivalent Units
Flow of Conversion
Flow of Production Physical Units Transferred In Costs
Completed and transferred out 14,000 14,000 14,000
Ending work in process inventory 17,000 17,000 3,400a
__________
a17,000 units each 20% completed = 3,400
Hamstein
Drying Department
Conversion Costs
Transferred In Total
Costs added during the period 4,800 1,858 6,658
Total costs to account for $ 4,960 $ 2,088 $7,048

(continued) P 5-53A
Req. 3
Hamstein
Drying Department
Cost Assignment
Conversion Costs
transferred out to assembling
operation 14,000 × ($0.16 + $0.12) $3,920
(b) Ending work in process inventory:
Transferred-in costs 17,000 × $0.16 2,720

Problems (Group B)
(30-45 min.) P 5-54B
Req. 1
Direct
materials
added
Start 30% 100%

Complete

(ending work in
process inventory)
Req. 2
Grand Lips
Lip Balm Department
Equivalent Unit Computation
Month Ended June 30
Flow of Production Physical Units Direct Materials Conversion Costs
Completed and
transferred out 15,500 15,500 15,500
Ending work in process, June 30 5,200 5,200 1,560 a
__________
a 5,200 × 0.30

(continued) P 5-54B
Grand Lips
Lip Balm Department
Month Ended June 30
Cost per Equivalent Unit: Direct Materials Conversion Costs
Beginning work in process $ 0 $ 0
Costs added during June 4,761 4,265*
Total costs to account for $ 4,761 $ 4,265
__________
*$3,340 + $925 = $4,265
Req. 3
Grand Lips
Lip Balm Department
Cost Assignment
Month Ended June 30
Total
(a) Units completed and transferred
out 15,500 × ($0.23 + $0.25) $7,440
Ending work in process, June 30:

process, June 30 1,586
Total cost accounted for $9,026
Req. 4
Work in Process Inventory
Bal. June 1 0 Transferred out 7,440

Direct labor 3,340
Manufacturing overhead 925
Bal. June 30 1,586

(30-45 min.) P 5-55B
Req. 1
Direct
materials
added
Start 70% 100%

Complete
12,000 meters completed and transferred out

(ending work in
process inventory)
Req. 2
Grand Northern Furniture Company
Sawing Department

Completed and transferred
out
12,000 12,000 12,000
Sept. 30
3,000 3,000 2,100a
accounted for
15,000
__________
a 3,000 × 0.70

(continued) P 5-55B
Grand Northern Furniture Company

Sawing Department
Cost per Equivalent Unit: Direct Materials Conversion Costs Total
Beginning work in process, Sept. 1

$ 0 $ 0 $ 0
Costs added during September 1,830,000 310,200b $2,140,200
Total costs to account for $1,830,000 $310,200 $2,140,200
Cost per equivalent unit $ 122 $ 22
__________
b $144,900 + $165,300 = $310,200
Req. 3
Colorado Table Company
Sawing Department
Cost Assignment
Total
(a) Completed and transferred out 12,000 × ($122 + $22) $1,728,000
(b)Ending work in process inventory:
Direct materials 3,000 × $122 366,000
Conversion costs 2,100 × $22 46,200
inventory 412,200
ToTotal costs accounted for $2,140,200
Total cost accumulated in the Sawing Department during September are the same as the Total Costs to
account for shown in Req. 2:
Direct materials…………………………... $1,830,000

Direct labor………………………………... 144,900
Manufacturing overhead……………….. 165,300
Total costs………………………………… $2,140,200

(continued) P 5-55B
Req. 4
Journal
POST.
Raw Materials Inventory 1,830,000
To journalize the direct materials, direct
labor, and manuf. overhead to the
Sawing Department.
Work in Process Inventory—Assembly 1,728,000

To transfer costs of units completed to
Assembly Department.
Note: Students may prepare three separate journal entry or the one summary journal entry (as shown above)
to record the three manufacturing costs.
(30-40 min.) P 5-56B

Req. 1
Chicken and Green

cream peppers and
added mushrooms
added
Start 60% 100%

Complete


(continued) P 5-56B
Req. 2
Value World
Mixing Department
Physical Chicken, Green Peppers, Conversion
Flow of Production Units Cream Mushrooms Costs
Beginning work in process, Nov. 1 0
Started in production 14,400
Ending work in process, Nov. 30 1,000 1,000a 0a 600b
__________
a The time line shows that chicken and cream are added at the beginning of the process. Green peppers and
mushrooms are not added until the end of the process. The ending inventory that is 60% of the way through
the production process has passed the point where the chicken and cream are added (but not the point where
the green peppers and mushrooms are added). The ending inventory is complete with respect to chicken and
cream, but it has no equivalent units of green peppers and mushrooms.
b 1,000 × 60% = 600
Req. 3
Value World
Mixing Department
Green Peppers and
Chicken and Mushrooms Conversion Costs
Cost per Equivalent Unit:
Cream
Costs added during Nov. $18,720c $ 6,700 $14,420d
Total costs to account for $18,720 $ 6,700 $14,420
Divide by total equivalent units ÷ 14,400 ÷ 13,400 ÷ 14,000
__________
c$14,320 + $4,400 = $18,720
d$11,400 + $3,020 = $14,420

(continued) P 5-56B
Req. 4
Value World
Mixing Department
Cost Assignment
Green Peppers
Chicken and Conversion
and Cream Mushrooms Costs Total
transferred out 13,400 × ($1.30 + $0.50 + $1.03) $37,922
Ending work in process, November 30:
Chicken and cream 1,000 × $1.30 1,300
Green peppers and mushrooms 0 x $0.50 0
(45-60 min.) P 5-57B
Req. 1
Transferred Direct
in from materials
Shaping added
Start 50% 100%

Complete
2,300 racks completed and transferred out
1,300 racks started,

but not completed (ending
work in process inventory)

(continued) P 5-57B
Req. 2
Metal Accessories
Plating Department
Equivalent Unit Computations (Weighted-Average)
Physical Units Transferred Direct Conversion
Flow of Production In Materials Costs
during March 2,300 2,300 2,300 2,300
Ending work in process, March 31 1,300 1,300a 0b 650c
accounted for 3,600
__________
a The time line shows that transferred-in costs are incurred at
the beginning of the plating process. Ending inventory was started this period, so it did pass the point where
transferred-in costs are added. The ending inventory is therefore complete with respect to transferred-in
costs.
b The time line shows that direct materials are not added until the end of the plating process. The ending
inventory is only 50% of the way through the plating process, so it has not yet incurred any plating direct
materials costs.
c 50% of the conversion work on the ending work in process inventory was done in March:
1,300 × 50% = 650
The explanations in the footnotes are not required.
Classic Accessories
Plating Department
Production Cost Report (Weighted-Average)
Transferred In Direct Materials Conversion
Costs Total
$20,400 $ 0 $13,500 $ 33,900
Costs added during March 40,800 27,600 57,300 125,700
Divide by equivalent units ÷ 3,600 ÷ 2,300 ÷ 2,950
Cost per equivalent unit $ 17 $ 12 $ 24

(continued) P 5-57B
Metal Accessories
Plating Department
Production Cost Report (Weighted-Average Method)
Assignment of total costs:
2,300 × ( $17 + $12 + $24) $121,900
Ending work in process
inventory:
Transferred-in costs 1,300 × $17 22,100
Direct materials 0 x $12 0
Conversion costs 650 × $24 15,600
inventory
Req. 3
Journal Entry
POST.
Work in Process Inventory—Shaping 40,800
To transfer in costs from Shaping
Department.

To requisition materials and assign
conversion costs to the Plating
Department.

To transfer cost of units completed to
finished goods.
Note: Students may have prepared three separate journal entries, rather than the one summary entry shown
above, to record the three manufacturing costs incurred in the Plating Department.

(40-50 min.) P 5-58B
Req. 1
Transferred in from
Molding
Start 20% 100%

Complete
18,000 units
Started, but
not completed
(ending work
in process
inventory)
Req. 2
Sidchrome
Drying Department
Equivalent Units
Flow of Conversion
Flow of Production Physical Units Transferred In Costs
Completed and transferred out 15,000 15,000 15,000
Ending work in process inventory 18,000 18,000 3,600a
__________
a15,000 units each 20% completed = 3,600
Sidchrome
Drying Department
Conversion Costs
Costs added during the period 4,850 2,942 7,792
(continued) P 5-58B
Req. 3
Sidchrome
Drying Department
Cost Assignment
Conversion Costs
(a) Completed and transferred out 15,000 × ($0.15 + $0.17) $4,800
(b) Ending work in process
inventory:
Transferred-in costs 18,000 × $0.15 2,700
Discussion & Analysis

A5-59
1. What characteristics of the product or manufacturing process would lead a company to use a
process costing system?
A company that uses a series of steps or processes to make large quantities of identical units would use
a process costing system.
Give two examples of companies that are likely to be using process costing.
Del Monte Foods and Rubbermaid are examples of companies that are likely to be using process costing.
What characteristics of the product or manufacturing process would lead a company to use a job
costing system?
A company that produces unique goods in relatively small batches would use a job costing system.
Give two examples of companies that are likely to be using job costing.
Price Waterhouse Coopers (an accounting firm) and Universal Studios (movie makers) are examples of
companies that are likely to be using job costing.
2. How are process costing and job costing similar? How are they different?
Process Costing and job costing are similar in these respects:
• Inventory flow through the accounts are the same
• Both cost accumulation systems for materials, labor, and overhead
Processing costing and job costing are different in these respects:
• Homogeneous products/services vs. heterogeneous products/services
• Large quantities of identical units vs. single units or small batches with large difference between
jobs
• More averaging vs. less averaging
3. What are conversion costs? In a job costing system, at least some conversion costs are assigned
directly to products. Why do all conversion costs need to be assigned to processing departments
in a process costing system?
Conversion costs are direct labor and overhead. They need to be assigned to processing departments in
a process costing system because they are the costs incurred to convert raw materials into a finished
product.

4. Why not assign all costs of production during a period to only the completed units?
Some costs of production are included in the goods that were started but not completed.
What happens if a company does this?
If a company assigns all the costs of production to only the completed units, those units will be
overcosted because they would include the costs of production that belong to the ending inventory.
Why are the costs of production in any period allocated between completed units and units in
work in process?
The costs of production belong to all the units that were in process during the period. Some of the units
are completed by the end of the period and some of the units are started, but not yet completed.
Is there any situation where a company can assign all costs of production during a period to the
completed units? If so, when?
If a company uses a just-in-time inventory system, they would not have any ending inventory. In that
case, all the costs of production would be assigned to the completed goods.
5. What information generated by a process costing system can be used by management? How can
management use this process costing information?
Total and unit costs for the department – controlling costs, basis for setting selling prices, determining
profitability, evaluate performance
Physical flow of units through the department – planning and directing
6. Why are the equivalent units for direct materials often different from the equivalent units for
conversion costs in the same period?
Often direct materials are added at the beginning of the process where conversion costs are added
evenly throughout the process. This typically results in higher equivalent units for direct materials than for
conversion costs.
7. Describe the flow of costs in a process costing system. List each type of journal entry that would
be made and describe the purpose of that journal entry.
The flow of costs in a process costing system is similar to the flow of costs in a job order costing system.
The main difference is that direct materials, direct labor, and manufacturing overhead are assigned to
processing departments rather than jobs. In addition, a journal entry must be made at the end of the
month to transfer costs to the next processing department.
Accounts Payable
To record the purchase of raw materials
Work-in-Process (WIP) – First Department
To record the requisition of raw materials to the department
WIP – First Department
Manufacturing Wages
To record the direct labor in the department
Manufacturing Overhead
To record the allocation of overhead
WIP – Second Department
To record the transfer of completed goods to the next department
Accounts Receivable
Sales
To record sales revenue
Cost of Goods Sold
Finished Goods
To record the costs of sales

8. If a company has very little or no inventory, what effect does that lack of inventory have on its
process costing system?
The process costing system is easier to use because there is no need for determining equivalent units
and distributing production costs between the completed units and the units in ending inventory.
What other benefits result from having very little to no inventory?
Companies with little to no inventory reduce the costs associated with it, such as the cost of storage, the
risk of holding obsolete goods, the costs of insurance and taxes, and the cost of tying up capital.
9. How does process costing differ between a first processing department and a second or later
processing department?
A first processing department does not have any units or costs transferred in as does a second or later
processing department.
10. “Process costing is easier to use than job costing.” Do you agree or disagree with this
I agree with the statement because with process costing, there are no job cost sheets that need to be
maintained during the production process. In a process costing system, all the accounting for
determining the unit costs takes place at the end of the period.
11. Think of a business or an organization that would use process costing. What types of waste are
likely to be generated during the manufacturing process? Are there ways to avoid this waste or to
minimize it? How might managerial accounting support the efforts to reduce waste in the
production process?
A restaurant will produce dirty fryer oil from its deep fryers that has to be changed frequently in order to
produce tasty and sanitary meals. This unwanted by-product will have to be disposed of at some cost.
One way to avoid this waste is to utilize separate fryers for different foods. For example, cook fish in one
fryer, chicken in another, and French fries in yet one another. Doing so can prolong the time needed
between changes, which in turn will result in less overall waste. A restaurant could only cook so many
chicken breasts before an undertone of chicken taste would attach itself to any other foods cooked in the
oil, not just chicken. Customers, especially vegetarians, would not appreciate nor tolerate the taste of
chicken in their zucchini spears or fried eggplant! Managerial accounting can support this process by
conducting cost-benefit analysis to determine whether or not the costs associated with running additional
fryers offsets the costs of fewer less frequent oil changes. Both the variable costs of running additional
fryers along with the fixed costs of the initial investment depreciated over the life of the fryers would come
into consideration.
12. Provide an example of how a company may change its processes to make its manufacturing more
efficient or environmentally sustainable. How will the company benefit?
There is often a direct correlation between being environmentally conscious and being economically
efficient. For example, a taxi-cab business could reduce its own fuel costs and harmful emissions into the
atmosphere by converting from traditional gas guzzling vehicles into more fuel efficient hybrids or
alternative fuel vehicles. The benefit could be twofold. The delivery company can reduce its overhead fuel
cost while promoting social responsibility and improving its public image. In today’s environment, special
interest groups and stakeholders more than ever are exercising their influence over socially irresponsible
corporations. They are capable of crippling companies that are not up to par with the eco-friendly
movement of the 21st century. Boycotting, generating negative publicity, and lobbying for stricter
compliance regulations are just some of the tactics that these special interest groups can use to
accomplish their objectives.

Application & Analysis
A5-60
Process Costing in Real Companies

Basic Discussion Questions
1. Describe the product selected.

The product selected was Kettle Brand Potato Chips.
2. Summarize the production process.
Truckloads of russet potatoes arrive at the manufacturing plant where they are first scrubbed, then crinkle
sliced unpeeled, and dropped into bubbling hot oil. A chip chef keeps the chips moving in the oil so the
chips don’t stick together. Once they are cooked, they ride out of the oil on a conveyor belt and pass
through an “optisort” machine that dumps out the overcooked chips. The last process is adding
seasonings in a drum.
3. Justify why you think this production process would dictate the use of a process costing system.
Kettle Brand would use a process costing system because they have a series of steps that make large
quantities of identical units.
4. List at least two separate processes that are performed in creating this product.
One process is scrubbing the potatoes and another is slicing the unpeeled potatoes.
What departments would house these processes?
The cleaning department houses the scrubbing machines and the slicing department houses the
machines that crinkle-cut the unpeeled potatoes.
5. Describe at least one department that would have ending work in process. What do the units look
like as they are “in process”?
The only department that would have ending work in process would be packaging. Once the potatoes
are started into production, they need to be completed all the way to packaging the individual bags.
Student responses will vary.
Decision Case
(20-25 min.) Decision Case A5-61
Req. 1
Cost per box for boxes completed and shipped out for immediate sale:
Cost of boxes completed and shipped out $235,600

=
Number of boxes completed and shipped out 19,000
= $12.40

Req. 2
Gross profit per box = Selling price per box − Cost per box
= $12.60 − $12.40
= $0.20
Req. 3
Jimmy’s Cricket Farm sold 19,000 boxes of crickets at a gross profit of $0.20 per box. Additionally, monthly
operating expenses of $2,000 must be covered.
June operating income = Gross profit − Operating expenses
= (19,000 boxes × $0.20 / box) − $2,000
= $3,800 − $2,000
= $1,800
Jones’s fears are well founded. The farm is making very little income.
Req. 4
Monthly operating income

Monthly return on investment = × 100%
Investment
$1,800
= × 100%
$400,000
= 0.45%
The monthly return on investment is less than one-half of a percent, which is well below the desired 2% return.
Req. 5
The monthly operating income that would provide a 2% rate of return is:

Monthly return on investment =
Investment

2% =
$400,000
Monthly operating income = $400,000 × 2%
= $8,000
To achieve a 2% rate of return, Jimmy’s Cricket Farm must charge a price that provides enough gross profit to
cover operating expenses of $2,000 and then provide $8,000 in operating income. This requires a gross profit
of $10,000.
Gross profit = (Selling price per box - Cost per box) × Boxes sold
$10,000 = (Selling price per box - $12.40) × 19,000
$10,000 = Selling price per box - $12.40

19,000
$0.5263* = Selling price per box - $12.40
$0.5263* + $12.40 = Selling price per box
$12.93* = Selling price per box
*Rounded

Ethical Issue
(25-35 min.) Ethical Issue A5-62
Req. 1
Inflating the percentage completion of ending work in process inventory increases the number of equivalent
units of work recorded as being done this period. The total costs are unchanged, so this reduces the cost per
equivalent unit. The number of finished units is unchanged, but the cost per unit is lower, so the total cost of
the completed goods decreases. Since the completed goods are sold immediately under the just-in-time
philosophy, this translates into a lower cost of goods sold. The larger number of equivalent units in ending work
in process inventory (from inflating the percentage completion) means that more of the cost winds up in ending
work in process inventory. Because more of the costs are allocated to ending inventory rather than cost of
goods sold, division profit increases. This helps Penn and Lopus report enough profit to receive their bonuses.
Req. 2
If the particle board division is an important part of Pacific Lumber, then overstating this division’s percentage
of completion may significantly affect the company’s financial statements. In particular,
a. the cost assigned to ending inventory increases, because more of the process cost is assigned to
ending work in process inventory;
b. total assets increase due to the increase in work in process inventory;

c. cost of goods sold is understated because too much of the process cost is assigned to ending work in
process inventory; and
d. gross profit and net income increase because of the decrease in cost of goods sold, so retained
earnings will also increase.
Req. 3
Using judgment to estimate the percentage completion of the year’s ending inventory is different than biasing
the estimate to obtain a preferred outcome. In this case, Lopus has intentionally overstated divisional income
to help get a bonus.
This year’s ending work in process inventory becomes next year’s beginning work in process inventory. Inflating
the percentage completion of this year’s ending work in process inventory means that more costs will be
assigned to this year’s ending inventory, which in turn becomes next year’s beginning inventory. This beginning
inventory is the first to be completed and sold. Hence, these higher costs will flow into next year’s cost of goods
sold; thereby increasing next year’s cost of goods sold.
Total processing costs are not affected, and this year’s understated cost of goods sold will be offset by next
year’s overstated cost of goods sold. But this means that each year’s financial information is misstated. These
misstatements may mislead management and financial statement users, and Penn and Lopus may receive
bonuses for this year that they did not earn. Due to the overstated cost of goods sold in the following year, they
will be less likely to receive bonuses for that year.

(continued) Ethical Issue A5-62
Req. 4
a. What is the ethical question? If the plant managers significantly inflated the percentage completion of
ending inventory and this significantly affects the particle board division’s net income, what is Green going
to do?
b. What are the options? The controller can:
(1) simply go along with the plant managers and accept the inflated percentage completion; or
(2) try to persuade the plant managers to use the proper completion rate. If that is not successful, Green
could inform her superior, perhaps the CFO, to ensure use of the proper completion rate.
c. What are the possible consequences? If the inflated percentage completion significantly overstates net
income and results in the plant managers receiving a bonus, the controller will have knowingly falsified the
financial statements in violation of the IMA’s Standards of Ethical Conduct. Top management and financial
statement users may be misled by the misstated financial statements. Green will be a party to the fraud,
even if she does not benefit directly. Moreover, if Green goes along with the plant managers this year, the
managers may want more from her next year. This type of fraud tends to escalate over time.
If she opposes the inflated percentage completion and the plant managers lose their bonuses, then Green’s
working relationship with the plant managers may suffer.
d. What should Green do? She can explain that the manipulation simply shifts income from next year to this
year. While this may help with their bonuses this year, it will make it more difficult to reach the profit target
and earn their bonuses next year. The controller needs to be sure of the proper percentage completion.
Given the potential serious consequences of intentionally overstating income and inventory, the controller
should try to convince the plant managers to use the proper percentage. If they refuse, and she believes
the financial statements will be significantly misstated, she should inform her superior.

Team Project
(50-60 min.) Team Project A5-63
Req. 1
Time line: Cooking
Direct
materials
added
Transferred Transferred
in from out to
Cutting Finished Goods
Start 30% 100%

Completion
130,000 lbs. completed and transferrred out
11,000 lbs.
started but not
finished (ending
work in process
inventory)
Time line is suggested, but is not required.

(continued) Team Project A5-63
Hermiston Food Processors

Cooking Department
Month Ended April 30
Transferred in during April 129,000
Completed and transferred out during April 130,000 130,000 130,000
Ending work in process, April 30 11,000 0a 3,300b
__________
aSee time line.
b11,000 × 30% = 3,300

Cooking Department
Total
April 1 $ 0 $ 576 $ 576
Costs added during April 6,500 15,420 21,920

McDonald’s has offered to pay $0.40 per pound of French fries. In addition to the cost of the raw shoestring
fries, the Cooking Department incurred $0.17 per pound ($0.05 direct materials plus $0.12 conversion costs).
For the McDonald’s order to be profitable, the cost of the raw shoestring fries would have to be less than $0.23
per pound ($0.40 − $0.17).

Req. 2
Time line: Cutting
Direct
materials
added
Transferred
out to
Cooking
Start 60% 100%

Completion
129,000 lbs. completed and transferred out
13,000 lbs. started but not finished

Time line is suggested, but not required.


Cutting Department
Started during April 121,000
during April 129,000 129,000 129,000
Ending work in process, April 30 13,000 13,000a 7,800b
__________
a See time line.
b 13,000 × 60% = 7,800

Cutting Department
Total
Beginning work in process, April 1

$ 1,260 $ 840 $ 2,100
Costs added during April 8,680 12,840 21,520
÷ 142,000 ÷ 136,800
The cost per pound of raw shoestring fries is $0.17 ($0.07 direct materials plus $0.10 conversion costs).


Req. 3
Hermiston should probably accept the offer. McDonalds has offered to pay $0.40 per pound of French fries.
Hermiston’s cost per pound is:
Cutting Department costs (raw shoestring fries)

(Req. 2)……………………………………………… $0.17
Cooking Department costs (Req. 1)……………….. 0.17
Total cost per pound…………………………………. $0.34
Hermiston would make a gross profit of $0.06 per pound ($0.40 − $0.34). If other costs associated with this
order are less than $0.06 per pound, the offer should be accepted. Hermiston should consider shipping costs,
import duties, etc., before making a final decision.

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Managerial Accounting 3rd Edition

Solution Manual: https://testbankpack.com/p/solution-manual-for-managerial-

Test Bank: https://testbankpack.com/p/test-bank-for-managerial-accounting-3rd-

QC-1. b QC-3. d QC-5. b QC-7. b QC-9. c

(5-10 min.) S 5-1

Job Costing System

170 Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall 171

The footnoted explanations are not required.

Ending work in process, June 30 28,000

half of the schedule.

physical units to account for” (141,000).

172 Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall

Ending work in process, March 31 18,000 b0 c5,040

Total physical units accounted

added at the end of the process)

1,100,000 × 100% of direct materials = 1,100,000 equivalent units of direct materials

85,000 × 100% of direct materials = 85,000 equivalent units of direct materials

However, only 62% of the conversion had taken place, so

85,000 × 62% of conversion costs = 52,700 equivalent units of conversion costs

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall 173

manufacturing overhead ($154,000)

÷ Total equivalent units ÷ 52,210 ÷ 45,490

($755,702) − Direct materials ($287,155)

174 Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall

(5-10 min.) S 5-10

2. The total costs accounted for are $3,160,500.

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall 175

2. The “Total costs accounted for” is $391,250.

4. Square feet sold 140,000

176 Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall

(10 min.) S 5-14

............ Conversion costs added evenly throughout process

Start 90% 100%

150,000 liters completed and transferred out

75,000 liters started but not finished

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall 177

Flow of Physical Conversion

Total physical units accounted for 225,000

process, so it has passed the point where water is added. The

178 Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall

(10 min.) S 5-17

(continues S 5-17) (5 min.) S 5-18

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall 179

Conversion costs added evenly throughout the process

Start 80% 100 %

153,000 liters completed

2,000 liters incomplete

180 Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall

(5-10 min.) S 5-20

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall 181

182 Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall

(10-15 min.) E 5-23A

(15-20 min) E 5-24A

Work in Process Inventory — Mixing Department

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall 183

Work in Process Inventory — Packaging Department

Finished Goods Inventory

Total cost assigned to loaves transferred to Finished Goods $ 346,500