Solution manual cost accounting 14e by carter ch07

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CHAPTER 7
DISCUSSION QUESTIONS

Q7-1. Quality costs may be grouped into the following three classifications:
1. Prevention costs are the costs incurred to
prevent product failure. They include the
cost of designing high quality products
and production systems, including the
costs of implementing and maintaining
such systems.
2. Appraisal costs are the costs incurred to
detect product failure. They include the
cost of inspecting and testing materials,
inspecting products during production,
and the cost of obtaining information from
customers about product satisfaction.
3. Failure costs are the costs incurred when a
product fails, and may occur internally or
externally. Internal failure costs are those
that occur during the manufacturing or production process (e.g., scrap, spoilage, and
rework), and external failure costs are
those that occur after the product has
been sold (e.g., warranty repairs and
replacements, sales refunds, handling
customer complaints, and lost sales
resulting from poor product quality).
Q7-2. TQM stands for total quality management,
which is a company-wide approach to quality
improvement in all processes and activities.

TQM is a pervasive philosophy of doing business that applies to all functional areas of the
company and to all personnel.
Q7-3. Five characteristics of TQM systems are:
1. The company’s objective for all business
activity is to serve its customers. The term
“product” is extended to include services
as well as goods, and “customer” includes
internal users as well as those outside of
the company who purchase the company’s
products. Each employee’s activity is oriented to providing service to the customer.
2. Top management provides an active
leadership role in the quality improvement
movement.
3. All employees are actively involved in
quality improvement. Employees are not
only asked to contribute ideas, but also to

Q7-4.

Q7-5.

Q7-6.

Q7-7.

7-1

find better ways of doing things.
Involvement can be successful only when
there is encouragement and an open and

honest environment of trust.
4. The company has a system of identifying
quality problems, developing solutions,
and setting quality improvement objectives. This typically involves organizing
employees from all ranks and from different organizational units along with managers who have authority to take the
necessary action to solve problems.
5. The company places a high value on its
employees and provides continuous training, as well as recognition for achievement. Employees perform best when they
are well trained, and they have the greatest capacity to contribute when they are
highly educated.
The concept of continuous quality improvement
differs from the concept of quality optimization
in that continuous quality improvement is a
dynamic process of change under the assumption that the ideal is not an absolute known
value; whereas quality optimization is a static
approach to finding the best solution to a
given set of fixed and known constraints.
The first problem with trying to inspect quality
into the product is that it detects internal failures only after considerable cost has been
incurred. The second problem is that the magnitude of the cost of the internal failures,
detected by inspection, is rarely measured
and typically ignored.
Companies should concentrate their efforts
on preventing poor quality rather than on trying to inspect it into the process, because it
will result in less total quality cost. The
approach is founded on the belief that by
increasing prevention costs, the cost of internal failures—such as scrap, spoilage, rework,
and downtime—will decline by a larger
amount than the increase in prevention costs.
Quality costs should be measured and

reported to management in order to provide
incentive and direction for improving quality.


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7-2

Large quality costs indicate large opportunities for improvement. Also, measurements
provide a basis for monitoring the cost of
quality and evaluating improvements.
Q7-8. Scrap includes (1) the filings and trimmings
remaining after processing materials, (2)
defective materials that cannot be used or
returned to the vendor, and (3) broken parts
resulting from employee errors or machine
failures. Spoiled goods differ from scrap in
that they are partially or fully completed units
that are in some way defective and are not
economically or physically correctable.
Spoiled goods may be units of the product or
component parts, and they may or may not
have a salvage value. Rework is the process
of correcting defective manufactured goods.
Q7-9. The cost of scrap, spoilage, and rework
should not be ignored, because such costs

Chapter 7

are often quite high and often result from

internal failures that can be eliminated.
Ignoring the cost of these internal failures
sends a signal to managers that such costs
are acceptable. Reporting such costs provides incentive for improvement, particularly if
the costs are large.
Q7-10. In order to know what to do with the cost, the
accountant must know whether the spoilage or
rework is caused by the customer or by an
internal failure. If spoilage or rework is the
result of a customer requirement, the unrecoverable cost should be charged to the job. On
the other hand, if the spoilage or rework is the
consequence of an internal failure, the unrecoverable cost should be removed from the job
(i.e., charged to Factory Overhead Control)
and reported to responsible management.


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Chapter 7

7-3

EXERCISES
E7-1
(1)
(2)
(3)
(4)

E7-2

E7-3

E7-4

E7-5

Accounts Receivable ...................................................
Scrap Sales (or Other Income)...........................

1,650

Accounts Receivable ...................................................
Cost of Goods Sold.............................................

1,650

Accounts Receivable ...................................................
Factory Overhead Control .................................

1,650

Accounts Receivable ...................................................
Work in Process .................................................

1,650

Spoiled Goods Inventory .............................................
Factory Overhead Control ...........................................
Work in Process .................................................

120
112

1,650
1,650
1,650
1,650

232

$27,000 total job cost/1,000 chairs = $27 cost per chair
Spoiled Goods Inventory ($10 × 100 chairs)..............
Factory Overhead Control (($27 – $10) × 100)...........
Finished Goods Inventory ($27 × 900 chairs)............
Work in Process .................................................

1,000
1,700
24,300

Spoiled goods inventory ($100 × 100 units) ..............
Cost of Goods Sold......................................................
Work in Process .................................................

10,000
94,000

Factory Overhead Control ...........................................
Materials (100 units × $1.50)...............................

Payroll (100 units × 1/4 hour × $10 per hour) ...
Applied Factory Overhead
(100 × 1/4 hr × $12 rate) .............................

700

Finished Goods Inventory ...........................................
Work in Process .................................................

6,600

27,000

104,000

150
250
300
6,600


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7-4

E7-6

Chapter 7

Work in Process............................................................

Materials (1,000 units × $1).................................
Payroll (1,000 units × 1/6 hour × $15) ................
Applied Factory Overhead (1,000 × 1/6 × $30)..

8,500

Cost of Goods Sold......................................................
Work in Process ($65,000 + $8,500)...................

73,500

Accounts Receivable ($73,500 × 150%) .....................
Sales .....................................................................

110,250

1,000
2,500
5,000
73,500
110,250


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Chapter 7

7-5

E7-7

(1)

Island Company
Forming Department
Cost of Production Report
For August

Quantity Schedule
Beginning inventory ...............................
Started in process this period ..............

Materials

Transferred to Finishing Department ....
Ending inventory .....................................
Spoiled in process ..................................

100%
100%

Labor

60%
100%

Cost Charged to Department
Beginning inventory:
Materials ....................................................................................
Labor...........................................................................................
Factory overhead ......................................................................

Total cost in beginning inventory......................................
Cost added during current period:
Materials ....................................................................................
Labor...........................................................................................
Factory overhead.......................................................................
Total cost added during current period............................
Total cost charged to department ..................................................
Cost Accounted for as Follows
Transferred to Finishing Department ....
Charge to Factory Overhead for spoilage:
Materials ............................................
Labor ..................................................
Factory overhead ..............................
Work in Process, ending inventory:
Materials ............................................
Labor ..................................................
Factory overhead ..............................
Total cost accounted for ........................

Units
8,000

Overhead

50%
100%

Quantity
1,000
9,000

10,000
8,000
1,500
500
10,000

Total
Cost
$ 1,260
770
1,400
$ 3,430

Equivalent
Units*

Unit
Cost**

$36,240
10,510
21,725
$68,475
$71,905

10,000
9,400
9,250

$3.75

1.20
2.50
$7.45

% Complete Unit Cost
100%
$7.45

Total Cost
$59,600

500
500
500

100%
100%
100%

$3.75
1.20
2.50

$1,875
600
1,250

1,500
1,500
1,500

100%
60%
50%

$3.75
1.20
2.50

$5,625
1,080
1,875

3,725

8,580
$71,905


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7-6

Chapter 7

E7-7 (Concluded)
*Total number of equivalent units required in the cost accounted for section determined as follows:

Equivalent units transferred out.........................
Equivalent units in ending inventory .................

Equivalent units of spoilage ...............................
Total equivalent units...........................................

Materials
8,000
1,500
500
10,000

Labor
8,000
900
500
9,400

Overhead
8,000
750
500
9,250

** Total cost (i.e., the cost in beginning inventory plus the cost added during the current period)
divided by the total number of equivalent units required in the cost accounted for section

(2)

Work in Process—Finishing Department...................
Factory Overhead Control ...........................................
Work in Process—Forming Department ..

59,600
3,725
63,325


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Chapter 7

7-7

E7-8
(1)

Juniper Company
Finishing Department
Cost of Production Report
For July

Quantity Schedule
Beginning inventory................................
Received from Cutting Department.......

Materials

Labor

Overhead

40%

100%

20%
100%

20%
100%

Transferred to Finished Goods ..............
Ending inventory .....................................
Spoiled in process ..................................

Cost Charged to Department
Beginning inventory:
Cost from preceding department.............................................
Materials .....................................................................................
Labor...........................................................................................
Factory overhead.......................................................................
Total cost in beginning inventory ....................................
Cost added during current period:
Cost from preceding department.............................................
Materials ....................................................................................
Labor...........................................................................................
Factory overhead ......................................................................
Total cost added during current period ...........................
Total cost charged to department ..................................................
Cost Accounted for as Follows
Transferred to Finished Goods ..............
Transferred to Spoiled Goods inventory
at salvage value ................................

Charge to Factory Overhead for spoilage:
Cost of completed spoiled units .....
Less salvage value of spoiled units
Work in Process, ending inventory:
Cost from preceding department ....
Materials ............................................
Labor ..................................................
Factory overhead ..............................
Total cost accounted for ........................

Units
3,800

Quantity
500
4,500
5,000
3,800
800
400
5,000

Total
Cost
$ 5,500
1,950
1,180
1,770
$ 10,400

Equivalent
Units*

Unit
Cost**

$ 54,500
20,650
16,260
24,390
$115,800
$126,200

5,000
4,520
4,360
4,360

$12.00
5.00
4.00
6.00
$27.00

% Complete Unit Cost
100%
$27.00

400

Total Cost
$102,600

$10.00

400
400

100%

800
800
800
800

100%
40%
20%
20%

4,000

$27.00
10.00

$10,800
4,000

$12.00
5.00

4.00
6.00

$ 9,600
1,600
640
960

6,800

12,800
$126,200


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7-8

Chapter 7

E7-8 (Concluded)
*Total number of equivalent units required in the cost accounted for section determined as follows:

Equivalent units transferred out ............
Equivalent units in ending inventory ....
Equivalent units of spoilage ..................
Total equivalent units .............................

Prior
Dept. Cost Materials

3,800
3,800
800
320
400
400
5,000
4,520

Labor
3,800
160
400
4,360

Overhead
3,800
160
400
4,360

** Total cost (i.e., the cost in beginning inventory plus the cost added during the current period)
divided by the total number of equivalent units required in the cost accounted for section

(2)

Finished Goods Inventory ...........................................
Spoiled Goods Inventory .............................................
Factory Overhead Control ...........................................
Work in Process—Finishing Department..........

102,600
4,000
6,800
113,400


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Chapter 7

E7-9
(1)

7-9

Carver Petroleum Inc.
Cracking Department
Cost of Production Report
For May

Quantity Schedule
Beginning inventory................................
Started in process this period ...............
Transferred to Refining Department......
Ending inventory .....................................
Lost in process .......................................

Materials

Conversion Cost

100%

70%

Cost Charged to Department
Beginning inventory:
Materials ....................................................................................
Conversion cost.........................................................................
Total cost in beginning inventory......................................
Cost added during current period:
Materials ....................................................................................
Conversion cost.........................................................................
Total cost added during current period............................
Total cost charged to department .................................................
Cost Accounted for as Follows
Transferred to Refining Department......
Work in Process, ending inventory:
Materials ............................................
Conversion cost ................................
Total cost accounted for ........................

Units
49,000
6,000
6,000

Quantity
5,000

55,000
60,000
49,000
6,000
5,000
60,000

Total
Cost
$ 1,900
240
$ 2,140

Equivalent
Units*

$20,100
5,080
$25,180
$27,320

55,000
53,200

.40
.10

$.40
.10
$

% Complete Unit Cost
100%
$.50
100%
70%

Unit
Cost**

.50

Total Cost
$24,500
$2,400
420

2,820
$27,320

*Total number of equivalent units required in the cost accounted for section determined as follows:

Equivalent units transferred out .....
Equivalent units in ending inventory
Total equivalent units .......................

Materials
49,000
6,000
55,000

Conversion Cost
49,000
4,200
53,200

** Total cost (i.e., the cost in beginning inventory plus the cost added during the current period)
divided by the total number of equivalent units required in the cost accounted for section

(2)

Work in Process—Refining Department ....................
Work in Process—Cracking Department ..........

24,500
24,500


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7-10

Chapter 7

E7-10 APPENDIX
(1)

Suarez Company
Tooling Department
Cost of Production Report

For March

Quantity Schedule
Beginning inventory................................
Started this period ..................................
Transferred to Finishing Department ....
Ending inventory .....................................
Spoiled in process ..................................

Materials
100%

Labor
70%

100%
100%

60%
90%

Overhead
60%

40%
90%

Quantity
2,000
13,000

15,000
7,000
3,000
5,000
15,000

Cost Charged to Department
Beginning inventory:
Materials .....................................................................................
Labor...........................................................................................
Factory overhead.......................................................................
Total cost in beginning inventory......................................
Cost added during current period:
Materials .....................................................................................
Labor...........................................................................................
Factory overhead ......................................................................
Total cost added during current period............................
Total cost charged to department ..................................................

Total
Cost
$ 1,600
290
950
$ 2,840

Equivalent
Units*

$ 9,750

2,380
9,200
$21,330
$24,170

13,000
11,900
11,500

Cost Accounted for as Follows
Transferred to Finishing Department:
From beginning inventory................
Cost to complete this period:
Materials ...............................
Labor .....................................
Factory overhead .................
Started and completed this period .
Total cost transferred to
Finishing Department ................
Charge to Factory Overhead for spoilage:
Materials ............................................
Labor ..................................................
Factory overhead ..............................
Work in Process, ending inventory:
Materials ............................................
Labor ..................................................
Factory overhead ..............................
Total cost accounted for ........................

Unit Cost

Units

Current %

Unit
Cost**

$.75
.20
.80
$1.75
Total Cost

$2,840
2,000
2,000
2,000
5,000

0%
30%
40%
100%

$ .75
.20
.80
$1.75

0
120
640

$ 3,600
8,750
$12,350

5,000
5,000
5,000

100%
90%
90%

$ .75
.20
.80

$3,750
900
3,600

3,000
3,000
3,000

100%
60%

40%

$ .75
.20
.80

$2,250
360
960

8,250

3,570
$24,170


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Chapter 7

7-11

E7-10 APPENDIX (Concluded)
* Number of equivalent units of cost added during the current period determined as follows:

To complete beginning inventory ............................
Started and completed this period ...........................
Ending inventory.........................................................
Spoiled units ...............................................................
Total equivalent units .................................................

Materials
0
5,000
3,000
5,000
13,000

Labor
600
5,000
1,800
4,500
11,900

Overhead
800
5,000
1,200
4,500
11,500

** Cost added during the current period divided by the number of equivalent units of cost added during the current period

(2)

Work in Process—Finishing Department...................
Factory Overhead Control ...........................................
Work in Process—Tooling Department .............

12,350
8,250
20,600


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7-12

Chapter 7

E7-11 APPENDIX
(1)

Matrix Furniture Company
Finishing Department
Cost of Production Report
For September

Quantity Schedule
Beginning inventory................................
Received from Fabricating Department
Transferred to Finished Goods ..............
Ending inventory .....................................
Spoiled in process ..................................

Materials
80%

Labor

40%

Overhead
40%

100%
100%

60%
100%

60%
100%

Cost Charged to Department
Beginning inventory:
Cost from preceding department.............................................
Materials .....................................................................................
Labor...........................................................................................
Factory overhead.......................................................................
Total cost in beginning inventory......................................
Cost added during current period:
Cost from preceding department.............................................
Materials .....................................................................................
Labor...........................................................................................
Factory overhead.......................................................................
Total cost added during current period............................
Total cost charged to department .................................................

Quantity

1,200
6,000
7,200
5,000
1,500
700
7,200

Total
Cost
$ 14,160
1,210
1,300
3,250
$ 19,920

Equivalent
Units*

Unit
Cost**

$ 72,000
6,240
12,240
30,600
$121,080
$141,000

6,000

6,240
6,120
6,120

$12.00
1.00
2.00
5.00
$20.00


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Chapter 7

7-13

E7-11 APPENDIX (Concluded)
Cost Accounted for as Follows
Transferred to Finished Goods:
From beginning inventory................
Cost to complete this period:
Materials ...............................
Labor .....................................
Factory overhead .................
Started and completed this period
Total cost transferred to
Finishing Department ................
Transferred to Spoiled Goods inventory
at salvage value ................................

Charge to Factory Overhead for spoilage:
Cost of completed spoiled units .....
Less salvage value of spoiled units
Work in Process, ending inventory:
Cost from preceding department ....
Materials ............................................
Labor ..................................................
Factory overhead ..............................
Total cost accounted for ........................

Units

Current %

Unit Cost

Total Cost
$19,920

1,200
1,200
1,200
3,800

20%
60%
60%
100%

$ 1.00

2.00
5.00
$20.00

240
1,440
3,600

$ 25,200
76,000
$101,200

700

$12.00

700
700

100%

1,500
1,500
1,500
1,500

100%
100%
60%
60%

8,400

$20.00
12.00

$14,000
8,400

$12.00
1.00
2.00
5.00

$18,000
1,500
1,800
4,500

5,600

25,800
$141,000

*Number of equivalent units of cost added during the current period determined as follows:

To complete beginning inventory ...
Started and completed this period .
Ending inventory...............................
Spoiled units .....................................

Total equivalent units .......................

Prior Dept.
Cost
0
3,800
1,500
700
6,000

Material
240
3,800
1,500
700
6,240

Labor
720
3,800
900
700
6,120

Overhead
720
3,800
900
700
6,120

** Cost added during the current period divided by the number of equivalent units of cost added during the current period

(2)

Finished Goods Inventory ...........................................
Spoiled Goods Inventory .............................................
Factory Overhead Control ...........................................
Work in Process—Finishing Department..........

101,200
8,400
5,600
115,200


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7-14

Chapter 7

E7-12 APPENDIX
(1)

Lanai Pop Inc.
Cooking Department
Cost of Production Report
For December

Quantity Schedule
Beginning inventory................................
Received from Mixing Department ........
Transferred to Bottling Department ......
Ending inventory .....................................
Lost in process........................................

Materials
75%

Labor
25%

100%

75%

Overhead
25%

75%

Quantity
10,000
40,000
50,000
37,000
8,000
5,000
50,000

Cost Charged to Department
Beginning inventory:
Cost from preceding department.............................................
Materials .....................................................................................
Labor...........................................................................................
Factory overhead.......................................................................
Total cost in beginning inventory......................................
Cost added during current period:
Cost from preceding department.............................................
Materials ....................................................................................
Labor...........................................................................................
Factory overhead.......................................................................

Total
Cost
$ 2,920
305
140
210
$ 3,575

Equivalent
Units*

$10,850
1,500
2,430
3,645

35,000
37,500
40,500
40,500

Total cost added during current period............................
Total cost charged to department ..................................................

$18,425
$22,000

Cost Accounted for as Follows
Transferred to Bottling Department:
From beginning inventory................
Cost to complete this period:
Materials ...............................
Labor .....................................
Factory overhead ................
Started and completed this period .
Total cost transferred to
Finishing Department ................
Work in Process, ending inventory:
Cost from preceding department ....
Materials ............................................
Labor ..................................................
Factory overhead ..............................
Total cost accounted for.........................

Unit Cost

Units

Current %

Unit
Cost**

$.31
.04
.06
.09
$.50
Total Cost

$3,575
10,000
10,000
10,000
27,000

25%
75%
75%
100%

$.04
.06
.09
$.50

100
450
675

$ 4,800
13,500
$18,300

8,000
8,000
8,000
8,000

100%
100%
75%
75%

$.31
.04
.06
.09

$2,480
320
360
540

3,700
$22,000

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Chapter 7

7-15

E7-12 APPENDIX (Concluded)
*Number of equivalent units of cost added during the current period determined as follows:

To complete beginning inventory ...
Started and completed this period .
Ending inventory...............................
Total equivalent units .......................

Prior
Dept. Cost Materials
0
2,500
27,000
27,000
8,000
8,000
35,000
37,500

Labor
7,500
27,000

6,000
40,500

Overhead
7,500
27,000
6,000
40,500

** Cost added during the current period divided by the number of equivalent units of cost added during the current period

(2)

Work in Process—Bottling Department .....................
Work in Process—Cooking Department ..........

18,300
18,300


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7-16

Chapter 7

PROBLEMS
P7-1
(1)

(2)

Spoiled Goods Inventory (200 units × $1.75).............
Factory Overhead Control ...........................................
Work in Process .................................................

350
1,450

Accounts Receivable ($550 + $350)............................
Scrap Sales .........................................................
Spoiled Goods Inventory ...................................

900

1,800
550
350

P7-2
(1)

(2)

$90,000 total job cost = $18 per unit
5,000 units on job
Spoiled Goods Inventory (200 units × $15 salvage) .
Factory Overhead Control ...........................................
Work in Process (200 units × $18 cost).............

3,000
600

Cost of Goods Sold......................................................
Work in Process ($90,000 – $3,600) ..................

86,400

Accounts Receivable ($86,400 × 140%) .....................
Sales .....................................................................

120,960

Spoiled Goods Inventory (200 units × $15 salvage)
Work in Process .................................................

3,000

Cost of Goods Sold......................................................
Work in Process ($90,000 – $3,000) ...................

87,000

Accounts Receivable ($87,000 × 140%) .....................
Sales .....................................................................

121,800

3,600
86,400

120,960
3,000
87,000
121,800


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Chapter 7

7-17

P7-3
(1)

(2)

Factory Overhead Control ...........................................
Materials (100 units × $2)....................................
Payroll (100 units × 1/2 hr × $12 rate) ...............
Applied Factory Overhead
(100 × 1/2 hr × $24 rate) .............................

2,000

Cost of Goods Sold......................................................
Work in Process .................................................

200,000

Accounts Receivable ($200,000 × 150%) ...................
Sales .....................................................................

300,000

Work in Process............................................................
Materials (100 units × $2)....................................
Payroll (100 units × 1/2 hour × $12 rate) ..........
Applied Factory Overhead
(100 × 1/2 hr × $24 rate) .............................

2,000

Cost of Goods Sold......................................................
Work in Process ($200,000 + $2,000).................

202,000

Accounts Receivable ($202,000 × 150%) ...................
Sales .....................................................................

303,000

200
600
1,200
200,000
300,000
200
600

1,200
202,000
303,000


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7-18

P7-4 (1)

Chapter 7

Billingsley Company
Cutting Department
Cost of Production Report
For April

Quantity Schedule
Beginning inventory................................
Started in process this period ...............
Transferred to Assembling Department
Ending inventory .....................................
Spoiled in process ..................................

Materials

100%
100%

Labor

60%
90%

Cost Charged to Department
Beginning inventory:
Materials .....................................................................................
Labor ..........................................................................................
Factory overhead.......................................................................
Total cost in beginning inventory ....................................
Cost added during current period:
Materials .....................................................................................
Labor...........................................................................................
Factory overhead ......................................................................
Total cost added during current period............................
Total cost charged to department .................................................
Cost Accounted for as Follows
Transferred to Assembling Department
Charge to Factory Overhead for spoilage:
Materials ............................................
Labor ..................................................
Factory overhead ..............................
Work in Process, ending inventory:
Materials ............................................
Labor .................................................
Factory overhead ..............................
Total cost accounted for ........................

Units

18,000

Overhead

60%
90%

Quantity
5,000
20,000
25,000
18,000
4,000
3,000
25,000

Total
Cost
$ 1,260
789
1,789
$ 3,838

Equivalent
Units*

Unit
Cost**

$36,240

10,761
21,311
$68,312
$72,150

25,000
23,100
23,100

$1.50
.50
1.00
$3.00

% Complete Unit Cost
100%
$3.00

Total Cost
$54,000

3,000
3,000
3,000

100%
90%
90%

$1.50

.50
1.00

$4,500
1,350
2,700

4,000
4,000
4,000

100%
60%
60%

$1.50
.50
1.00

$6,000
1,200
2,400

8,550

9,600
$72,150

*Total number of equivalent units required in the cost accounted for section determined as follows:

Equivalent units transferred out.........................
Equivalent units in ending inventory .................
Equivalent units of ...............................................
Total equivalent units .........................................

Materials
18,000
4,000
3,000
25,000

Labor
18,000
2,400
2,700
23,100

Overhead
18,000
2,400
2,700
23,100

** Total cost (i.e., the cost in beginning inventory plus the cost added during the current period)
divided by the total number of equivalent units required in the cost accounted for section


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Chapter 7

7-19

P7-4 (Continued)
Billingsley Company
Assembling Department
Cost of Production Report
For April
Quantity Schedule
Beginning inventory................................
Received from Cutting Department.......

Materials

Labor

Overhead

80%
100%

20%
100%

20%
100%

Transferred to Finished Goods Inventory
Ending inventory .....................................
Spoiled in process ..................................

Cost Charged to Department
Beginning inventory:
Cost from preceding department ...........................................
Materials .....................................................................................
Labor...........................................................................................
Factory overhead.......................................................................
Total cost in beginning inventory......................................
Cost added during current period:
Cost from preceding department ...........................................
Materials .....................................................................................
Labor...........................................................................................
Factory overhead.......................................................................
Total cost added during current period ...........................
Total cost charged to department ..................................................
Cost Accounted for as Follows
Transferred to Finished Goods ..............
Transferred to Spoiled Goods Inventory
at salvage value ................................
Charge to Factory Overhead for spoilage:
Cost of completed spoiled units .....
Less salvage value of spoiled units
Work in Process, ending inventory:
Cost from preceding department ....
Materials ............................................
Labor ..................................................
Factory overhead ..............................
Total cost accounted for.........................

Units

17,000

Quantity
4,000
18,000
22,000
17,000
4,000
1,000
22,000

Total
Cost
$ 12,000
38,028
3,356
5,034
$ 58,418

Equivalent
Units*

Unit
Cost**

54,000
163,372
15,444
23,166
$255,982

$314,400

22,000
21,200
18,800
18,800

$ 3.00
9.50
1.00
1.50
$15.00

% Complete Unit Cost
100%
$15.00

1,000

Total Cost
$255,000

$ 3.00

1,000
1,000

100%

4,000

4,000
4,000
4,000

100%
80%
20%
20%

3,000

$15.00
3.00

$15,000
3,000

$3.00
9.50
1.00
1.50

$12,000
30,400
800
1,200

12,000

44,400

$314,400


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7-20

Chapter 7

P7-4 (Concluded)
* Total number of equivalent units required in the cost accounted for section determined as follows:

Equivalent units transferred out .....
Equivalent units in ending inventory
Equivalent units of spoilage ............
Total equivalent units .......................

Prior
Dept. Cost Materials
17,000
17,000
4,000
3,200
1,000
1,000
22,000
21,200

Labor
17,000

800
1,000
18,800

Overhead
17,000
800
1,000
18,800

** Total cost (i.e., the cost in beginning inventory plus the cost added during the current period)
divided by the total number of equivalent units required in the cost accounted for section

(2)

Work in Process—Assembling Department ..............
Factory Overhead Control ...........................................
Work in Process—Cutting Department .............

54,000
8,550

Finished Goods Inventory ...........................................
Spoiled Goods Inventory .............................................
Factory Overhead Control ...........................................
Work in Process—Assembling Department .....

255,000
3,000
12,000

62,550

270,000


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Chapter 7

7-21

P7-5
(1)

Hulvey Brewery Company
Mixing and Brewing Department
Cost of Production Report
For January

Quantity Schedule
Beginning inventory................................
Started in process this period ...............
Transferred to Canning Department......
Ending inventory .....................................
Lost in process .......................................

Materials

100%

Labor

40%

Cost Charged to Department
Beginning inventory:
Materials .....................................................................................
Labor.........................................................................................
Factory overhead.......................................................................
Total cost in beginning inventory......................................
Cost added during current period:
Materials .....................................................................................
Labor...........................................................................................
Factory overhead.......................................................................
Total cost added during current period............................
Total cost charged to department ..................................................

Cost Accounted for as Follows
Transferred to Canning Department......
Work in Process, ending inventory:
Materials ............................................
Labor ..................................................
Factory overhead ..............................
Total cost accounted for ........................

Units
28,000

%

Complete
100%

6,000
6,000
6,000

100%
40%
40%

Overhead

40%

Quantity
4,000
36,000
40,000
28,000
6,000
6,000
40,000

Total
Cost
$ 600
88
128
$ 816

Equivalent
Units*

$4,840
824
1,088
$6,752
$7,568

34,000
30,400
30,400

$.16
.03
.04
$.23

Unit Cost
$.23
$.16
.03
.04

Unit
Cost**

Total Cost
$6,440

$960
72
96

1,128
$7,568

*Total number of equivalent units required in the cost accounted for section determined as follows:

Equivalent units transferred out................................
Equivalent units in ending inventory ........................
Total equivalent units .................................................

Materials
28,000
6,000
34,000

Labor
28,000
2,400
30,400

Overhead
28,000
2,400
30,400

** Total cost (i.e., the cost in beginning inventory plus the cost added during the current period)
divided by the total number of equivalent units required in the cost accounted for section

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7-22

Chapter 7

P7-5 (Continued)
Hulvey Brewery Company
Canning Department
Cost of Production Report
For January
Quantity Schedule
Beginning inventory................................
Received from Mixing and
Brewing Department ........................
Transferred to Finished Goods Inventory
Ending inventory .....................................
Spoiled in process .................................

Materials

Labor

Quantity
2,000
28,000
30,000

100%
100%

60%
80%

Cost Charged to Department
Beginning inventory:
Cost from preceding department.............................................
Materials ....................................................................................
Labor...........................................................................................
Factory overhead.......................................................................
Total cost in beginning inventory ....................................
Cost added during current period:
Cost from preceding department ...........................................
Materials ....................................................................................
Labor ..........................................................................................
Factory overhead ......................................................................
Total cost added during current period............................
Total cost charged to department ..................................................

Cost Accounted for as Follows
Transferred to Finished Goods Inventory
Charge to Factory Overhead for spoilage:
Cost from preceding department ...
Materials ...........................................
Labor .................................................
Factory overhead .............................
Work in Process, ending inventory:
Cost from preceding department ...

Materials ...........................................
Labor .................................................
Factory overhead ..............................
Total cost accounted for.........................

Overhead

60%
80%

25,000
1,000
4,000
30,000

Total
Cost
$ 550
190
75
150
$ 965

Equivalent
Units*

Unit
Cost**

$ 6,440

1,520
789
1,578
$10,327
$11,292

30,000
30,000
28,800
28,800

$.233
.057
.030
.060
$.380

Units
25,000

%
Complete
100%

Unit Cost
$.380

4,000
4,000
4,000

4,000

100%
100%
80%
80%

$.233
.057
.030
.060

$932
228
96
192

1,000
1,000
1,000
1,000

100%
100%
60%
60%

$.233
.057
.030

.060

$233
57
18
36

Total Cost
$ 9,500

1,448

344
$11,292


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Chapter 7

7-23

P7-5 (Concluded)
*Total number of equivalent units required in the cost accounted for section determined as follows:
Prior
Dept. Cost Materials
Equivalent units transferred out .....
25,000
25,000
Equivalent units in ending inventory

1,000
1,000
Equivalent units of spoilage ............
4,000
4,000
Total equivalent units .......................
30,000
30,000

Labor
25,000
600
3,200
28,800

Overhead
25,000
600
3,200
28,800

** Total cost (i.e., the cost in beginning inventory plus the cost added during the current period)
divided by the total number of equivalent units required in the cost accounted for section

(2)

Work in Process—Canning Department ....................
Work in Process—Mixing and
Brewing Department .................................

6,440

Finished Goods Inventory ...........................................
Factory Overhead Control ...........................................
Work in Process—Canning Department ..........

9,500
1,448

6,440

10,948


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7-24

Chapter 7

P7-6 APPENDIX
(1)

Hadenville Tool Company
Fabricating Department
Cost of Production Report
For April

Quantity Schedule
Beginning inventory................................

Started this period ..................................
Transferred to Finishing Department ....
Ending inventory .....................................
Spoiled in process ..................................

Materials
100%

Labor
70%

100%
100%

40%
60%

Cost Charged to Department
Beginning inventory:
Materials .....................................................................................
Labor...........................................................................................
Factory overhead.......................................................................
Total cost in beginning inventory......................................
Cost added during current period:
Materials .....................................................................................
Labor ..........................................................................................
Factory overhead ......................................................................
Total cost added during current period............................
Total cost charged to department .................................................

Overhead
70%

40%
60%

Quantity
2,000
9,000
11,000
9,000
1,500
500
11,000

Total
Cost
$ 1,900
340
1,020
$ 3,260

Equivalent
Units*

Unit
Cost**

$ 9,180
2,125

6,375
$17,680
$20,940

9,000
8,500
8,500

$1.02
.25
.75
$2.02


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Chapter 7

7-25

P7-6 APPENDIX (Continued)
Cost Accounted for as Follows
Transferred to Finishing Department:
From beginning inventory ..............
Cost to complete this period:
Labor .....................................
Factory overhead .................
Started and completed this period .
Total cost transferred to Finishing
Department ................................

Charge to Factory Overhead for spoilage:
Materials ............................................
Labor ..................................................
Factory overhead .............................
Work in Process, ending inventory:
Materials ...........................................
Labor ..................................................
Factory overhead ..............................
Total cost accounted for ........................

Units

Current %

Unit Cost

Total Cost
$3,260

2,000
2,000
7,000

30%
30%
100%

$ .25
.75
$2.02

150
450

$ 3,860
14,140
$18,000

500
500
500

100%
60%
60%

$1.02
.25
.75

$ 510
75
225

1,500
1,500
1,500

100%
40%

40%

$1.02
.25
.75

$1,530
150
450

810

2,130
$20,940

*Number of equivalent units of cost added during the current period determined as follows:

To complete beginning inventory .......................
Started and completed this period.....................
Ending inventory ..................................................
Spoiled units ........................................................
Total equivalent units .........................................

Materials
0
7,000
1,500
500
9,000

Labor
600
7,000
600
300
8,500

Overhead
600
7,000
600
300
8,500

** Cost added during the current period divided by the number of equivalent units of cost added during the current period