ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY

CPA Review Batch 44  October 2022 CPA Licensure Examination

AFAR-16
ADVANCED FINANCIAL ACCOUNTING & REPORTING (AFAR) A. DAYAG  G. CAIGA  M. NGINA  A. CRUZ

COST ACCOUNTING: PROCESS COSTING

Process Costing. This method is used when products are manufactured under the
conditions of continuous processing or mass production methods where the products
manufactured within a department (or cost center) are homogenous (similar products)
with equal amount of materials, labor, and overhead applied to such products.

These conditions often exist in an industry that produces like-kind of products or

commodities such as paper, lumber, pipe petroleum, textiles, steel, wire, bricks,
cement, flour, sugar peanut butter, meat, sugar, breakfast cereals, linoleum, leather,
nylon, baby foods, paint, tires and tubes, glass, mining, and canneries. Process
costing is also used by firms that manufacture simple machined parts and small
electrical parts (nails, nuts and bolts, light bulbs, semiconductor chips, and floppy
disks), and by assembly-type industries (automobiles, engines, tape recorders, personal
computers, and household appliances. Some utility companies such as gas, water, and
electricity and no-manufacturing businesses such as food preparation in fast-food,
restaurants, mail sorting in post offices, check processing in banks, and student
registration in college.
In process costing, the cost accumulation of materials, labor and overhead must be
by department or cost center. The cost assigned to each unit is determined by dividing
the total cost charged to the cost center by the number of units produced. Cost
centers are usually departments but it may also be processing centers within the
departments.

The primary requirement is that all the products manufactured within the cost center
during the period must be the same (similar in nature or homogenous) otherwise; process
costing will result in a distortion of product cost.

In manufacturing firms, production can take place in several departments. Each

department performs a specific operation or process leading to the completion of the
product.

For example, the first department typically performs the starting phase of work on
the product, such as cutting, stamping, molding, or shaping the product or components
parts. When the work in the first department is completed, the units are transferred
to a second department. The second department then performs its work, such as
assembling, sanding, painting, or packaging, and transfers the units on the next
department, which performs, its work and so forth, until the units are finally completed
and transferred to the finished goods storeroom.

Methods of Treating Beginning Inventory in Process Costing (Cost Flow

Assumptions):
1. FIFO Method. Only the costs incurred this period are allocated between finished
goods and ending work-in process. Beginning inventory costs are maintained
separately from current period costs.
Finished Goods this period are costed separately as either started last period
and completed this period or started this period or completed this period.

2. Weighted Average Method. It averages all materials, labor and overhead both
incurred in the beginning work-in-process and those incurred this period. Thus,
no differentiation is made between goods started in the preceding and the current
period.
The result of such computation is that the FIFO Method EUP (equivalent units of
production) differs from the Weighted Average Method EUP by the amount of EUP in
beginning work-in process.
Methods of Application of Costs Elements in Process Costing:
1. Even Application of Costs – materials, labor, and overhead were applied at the
same rate throughout the production, thereby, rendering the equivalent units of
production (EUP) to be of equal amounts.

2. Uneven Application of Costs – materials, labor an overhead may be applied at

different stages of production rendering their equivalent units of production to
be of unequal amounts.

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
COST ACCOUNTING: PROCESS COSTING AFAR-16
I – Equivalent Production
1. Department II of Charity Manufacturing Company presents the following production
data for the month of May:
Opening inventory, 3/8 complete 4,000 units
Started in process 13,000 units
Transferred 9,000 units
Closing inventory, ½ complete 4,000 units
¼ incomplete 4,000 units

What are the equivalent units of production for FIFO and Average Method the month
of May?
FIFO Average FIFO Average
A. 12,500 13,000 C. 12,500 14,000
B. 17,000 12,500 D. 15,000 14,000

2. Bart Company adds materials at the end of the process in Department M. The following
information pertains to Department M’s work-in-process during April:
Units
Work-in-process, 4/1 (60% complete, conversion costs) 3,000
Started in January 25,000
Completed 20,000
Work-in-process, 4/30 (75% complete conversion costs) 8,000

What are the equivalent units of production for the month of January:
FIFO Average
Materials Conversion Materials Conversion
A. 28,000 28,000 28,000 28,000
B. 20,000 20,000 26,000 26,000
C. 20,000 24,200 20,000 26,000
D. 24,200 20,000 26,000 20,000

3. Wentworth Company makes fabric-covered hatboxes. The company began September with
500 boxes in process that were 100 percent complete as to cardboard, 80 percent
complete as to cloth, and 60 percent complete as to conversion costs. During the
month, 3,300 boxes were started. On September 30, 350 boxes were in process (100
percent complete as to cardboard, 70 percent complete as to cloth, and 55 percent
complete as to conversion costs). Using the FIFO method, what are equivalent units?
Materials
Cardboard Cloth Conversion
A. 3,300 3,295 3,342.50
B. 3,800 3,595 3,542.50
C. 3,300 3,595 3,542.50
D. 3,800 3,295 3,242.50

4. Thomson Company makes small metal containers. The company began December with 250
containers in process that were 30 percent complete as to material and 40 percent
complete as to conversion costs. During the month, 5,000 containers were started.
At month end, 1,700 containers were still in process (45 percent complete as to
material and 80 percent complete as to conversion costs). Using the weighted average
method, what are the equivalent units for materials and conversion costs?
Materials Conversion Costs Materials Conversion Costs
A. 4,315 4,910 C. 4,485 3,890
B. 4,440 4,810 D. 4,315 4,810
Items 5 and 6 are based on the following question:
Duke Company transferred 5,500 units to Finished Goods Inventory during September. On
September 1, the company had 300 units on hand (40 percent complete as to both material
and conversion costs). On September 30, the company had 800 units (10 percent complete
as to material and 20 percent complete as to conversion costs).

5. The number of units started and completed during September was:

A. 5,200 C. 5,500
B. 5,380 D. 6,300
6. The number of units started during September was:
A. 5,200 C. 5,500
B. 5,380 D. 6,000

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
COST ACCOUNTING: PROCESS COSTING AFAR-16
7. Dowell Company started 9,000 units in February. The company transferred out 7,000
finished units and ended the period with 3,500 units that were 40 percent complete
as to both material and conversion costs. Beginning Work in Process Inventory units
were
A. 500 C. 1,500
B. 600 D. 2,000
8. Carter Company uses a weighted average process costing system. Material is added at
the start of production. Dixie Company started 13,000 units into production and had
4,500 units in process at the start of the period that was 60 percent complete as
to conversion costs. If Dixie transferred out 11,750 units, how many units were in
ending Work in Process Inventory?
A. 1,250 C. 3,500
B. 3,000 D. 5,750
9. The Wiring Department is the second stage of Flem Company’s production cycle. On
May 1, the BWIP contained 25,000 units which were 60% complete as to conversion
costs. During May, 100,000 units were transferred-in from the first stage of Flem’s
production cycle. On May 31, EWIP contained 20,000 units which were 80% complete
as to conversion costs. Materials added at the end of the process. Using FIFO
method, the EUP on May 31 were:
Transferred-in Costs Materials Conversion Costs
A. 100,000 125,000 100,000
B. 125,000 105,000 105,000
C. 125,000 105,000 121,000
D. 100,000 105,000 106,000
10. Using the same information in No. 9, except that weighted average method is used,
the EUP on May 31 were:
Transferred-in Costs Materials Conversion Costs
A. 100,000 125,000 100,000
B. 125,000 105,000 105,000
C. 125,000 105,000 121,000
D. 125,000 125,000 121,000
II – Costs Analysis
Items 1 to 3 are based on the following information:
Roy Company manufactures product X in a two-stage production cycle in Department A and
B. Materials are added at the beginning of the process in Department B. Conversion
costs for Department B were 50% complete as to the 6,000 units in the beginning work
in process and 75% complete as to the 8,000 units in the ending work in process. 12,000
units were completed and transferred out of Department B during February 2016. An
analysis of the costs relating to work in process (WIP) and production activity in
Department B for February 2016 is as follows:
Cost
Transferred- in Materials Conversion
WIP, February 1: Costs attached P 12,000 P 2,500 P 1,000
February activity: Costs Added 29,000 5,500 5,000
1. The cost per equivalent from the preceding department (rounded to nearest
centavo):
FIFO Average FIFO Average
A. P2.07 P2.05 C. P2.77 P2.78
B. P2.78 P2.77 D. P2.05 P2.07
2. The current total unit cost in this department (for materials, labor, and
overhead) for product X (rounded to nearest centavo):
FIFO Average FIFO Average
A. P .72 P .73 C. P .77 P .78
B. P .78 P .77 D. P .78 P .79
3. The total cost per equivalent unit for February was: (rounded to nearest centavo):
FIFO Average FIFO Average
A. P2.79 P2.78 C. P2.77 P2.78
C. P2.78 P2.79 D. P4.78 P2.78

4. The total cost per equivalent unit transferred-out for February 2016 of product X,
rounded to the nearest centavo, was:
FIFO Average FIFO Average
A. P2.77 P2.77 C. P2.77 P2.78
B. P2.78 P2.77 D. P2.78 P2.78

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
COST ACCOUNTING: PROCESS COSTING AFAR-16
Items 5 to 19 are based on the following information:
On April 1, 2016, the Collins Company had 6,000 units of work-in-process in Department
B, the second and last stage of their production cycle. The costs attached to these
6,000 units were P12,000 of costs transferred-in from Department A, P2,500 of material
cost added in Department B and P2,000 of conversion cost added in Department B.
Materials are added in the beginning of the process in Department B. Conversion costs
was 50% complete on April 1, 2016. During April, 14,000 units were transferred-in from
Department A at a cost of P27,000; and materials costs of P3,500 and conversion costs
of P3,000 were added in Department B. On April 30, 2016, Department B had 5,000 units
of work-in-process 60% complete as to conversion costs. The costs attached to these
5,000 units were P10,500 of costs transferred-in from Department A, P1,800 of material
costs added in Department B and P800 of conversion costs added in Department B.
Using FIFO Method:
5. What are the unit costs (rounded to nearest centavo)?
(Preceding Dept.) (Current Department)
Transferred-In Materials Conversion Costs
A. P1.93 P.25 P.20
B. P1.95 P.30 P.28
C. P1.80 P.30 P.27
D. P1.70 P.25 P.28
6. The total unit cost per equivalent unit for April was (rounded to nearest
centavo):
A. P2.53 C. P0.58
B. P2.38 D. P0.45
7. The cost of the work-in-process, beginning, finished and transferred to the next
department (rounded to nearest peso):
A. P0 C. P16,500
B. P600 D. P17,100
8. The total cost of the units received, finished and transferred to next department
(rounded to nearest peso):
A. P17,100 C. P27,000
B. P21,420 D. P21,420
9. The total cost transferred out (rounded to nearest peso):
A. P22,020 C. P37,950
B. P34,020 D. P38,520
10. The portion of the total cost of ending work-in-process attributable to:
Transferred-In Materials Conversion Costs
A. P9,650 P1,250 P 600
B. P9,750 P1,500 P 840
C. P9,000 P1,500 P 810
D. P9,650 P1,250 P 840
11. The total cost of ending work-in-process (rounded to nearest peso):
A. P 1,850 C. P11,500
B. P 9,650 D. P21,420
12. The total cost to be accounted for (rounded to nearest hundred):
A. P22,000 C. P38,000
B. P34,000 D. P50,000
Using Weighted-Average Method:
13. What are the unit costs (rounded to nearest centavo)?
(Preceding Dept.) (Current Department)
Transferred-In Materials Conversion Costs
A. P1.93 P.25 P.20
B. P1.95 P.30 P.28
C. P1.80 P.30 P.27
D. P1.70 P.25 P.28
14. The total cost per equivalent unit for April was (rounded to nearest centavo):
A. P2.53 C. P0.58
B. P2.38 D. P0.45

15. The cost of the work-in-process, beginning, finished and transferred to the next
department (rounded to nearest peso):
A. P0 C. P16,500
B. P600 D. P17,100

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
COST ACCOUNTING: PROCESS COSTING AFAR-16
16. The total cost transferred out (rounded to nearest peso):
A. P22,020 C. P37,950
B. P34,020 D. P38,520

17. The portion of the total cost of ending work-in-process attributable to:
Transferred-In Materials Conversion Costs
A. P9,650 P1,250 P 600
B. P9,750 P1,500 P 840
C. P9,000 P1,500 P 810
D. P9,650 P1,250 P 840
18. The total cost of ending work-in-process (rounded to nearest peso):
A. P 1,850 C. P11,500
B. P 9,650 D. P12,090
19. The total cost to be accounted for (rounded to nearest hundred):
A. P22,000 C. P38,000
B. P34,000 D. P50,000

20. For the month of May 2016, the Finishing Department of Apple, Inc. had in opening
work-in-process 80% complete units and in ending work-in-process 50% complete
units. Related data for the month follow:

Conversion
Units Costs
Work-in-process 50,000 P 88,000
Units started and costs incurred during May 270,000 572,000
Units completed and transferred during May 200,000
If the company uses FIFO costing, the conversion cost of the work-in-process at
the end of May would be:
A. P132,000 C. P176,000
B. P156,000 D. P254,000
21. Using the same information in No. 20 and using average method (unit cost should be
rounded to the nearest centavo), the conversion cost of the work-in-process at the
end of May would be:
A. P146,400 C. P176,000
B. P152,400 D. P254,000
22. Maurice Company adds materials at the beginning of the process in the Forming
Department, which is the first of two stages of its production cycle. Information
concerning the materials used in the Forming Department in April is as follows:

Materials
Units Costs
Work-in-process 12,000 P6,000
Units started 100,000 51,120
Units completed and transferred 88,000

Using FIFO method (using four decimals), what was the material cost of WIP at April
30?
A. P 6,120 C. P12,240
B. P11,040 D. P12,269

23. Using the same information in No. 22 and using weighted average method, what was
the material cost of WIP at April 30?
A. P 6,120 C. P12,000
B. P11,040 D. P12,240

24. Following are the data for September taken from the cost records of the Mixing
Department, Fair Manufacturing Company which uses the average costing method:

Work-in-process, August 31 (all materials, 50%

conversion costs) 1,000 units
Put into process during the month 10,000 units
Work-in-process, September 30 (all materials, 60%
converted) 1,400 units

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COST ACCOUNTING: PROCESS COSTING AFAR-16
Costs:
Work-in-process, August 31:
Materials…………………………………………………………………………………………………………….P 24,000
Labor………………………………………………………………………………………………………………………… 15,000
Factory overhead…………………………………………………………………………………………… 7,600
Put into process during the month:
Materials…………………………………………………………………………………………………………….P251,000
Labor………………………………………………………………………………………………………………………… 193,000
Factory overhead…………………………………………………………………………………………… 149,000
Assuming no lost units, the unit cost for labor was:
A. P10 C. P20
B. P15 D. P25
25. Using the same information in No. 24, the total cost of the units completed and
transferred to the next department was:
A. P576,000 C. P640,400
B. P605,400 D. P693,800
26. Using the same information in No. 24 compute the total cost of the work-in-process
on September 30 was:
A. P29,400 C. P 64,400
B. P46,600 D. P103,800
27. Samahan Inc. manufactures a highly sensitive smoke alarms. The company usesthe
FIFO method for process costing and for costing goods sold. In costing finished
goods, the unit cost for units completed from the work in process inventory at the
beginning is kept separate from the unit cost of smoke alarm started and completed
during the month.

The total manufacturing costs for the month of June is P264,000. There were 2,750
units completed and transferred. The inventories at the beginning of June are as
follows:
Smoke alarm in process, estimated 80% complete 1,250 units P128,000
Smoke alarm on hand (completed) 600 units) 76,800
The inventories at the end of June are:
Smoke alarm in process(estimated 50% complete) 500 units
Smoke alarm on hand (completed) 700 units

The cost assigned to the work in process inventory at the end is:
A. P32,200 C. P64,000
B. P33,000 D. P66,000
28. Using the same information in No. 27, the cost assigned to the finished goods
inventory at the end is:
A. P92,400 C. P66,000
B. P79,200 D. P52,800
29. Information for the month of January concerning Department A, the first stage of
Ogden Corporation’s production cycle is as follows:
Materials Conversion
BWIP P 8,000 P 6,000
Current costs __40,000 __32,000
Total costs P 48,000 P 38,000

Equivalent units using average method 100,000 95,000

Average unit costs P .48 P .40
Goods completed 90,000 units
EWIP 10,000 units

Materials are added at the beginning of the process. The ending work-in-process is
50% complete as to conversion costs. How would the total costs accounted for be
distributed, using the average method?
Goods Completed Ending WIP
A. P79,200 P6,800
B. P79,200 P8,800
C. P86,000 P 0
D. P88,000 P6,800

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COST ACCOUNTING: PROCESS COSTING AFAR-16
30. Information concerning Department B of Simon Company is as follows:
Transferred- Conversion
Units Cost in Materials costs Total
BWIP 5,000 P 6,300 P 2,900 P -0- P 3,400 P6,300
Units
transferred-in 35,000 58,000 17,500 25,500 15,000 58,000
40,000 P64,300 P20,400 P25,500 P18,400 P64,300
Units completed 37,000
EWIP 3,000
Conversion costs were 20% complete as to the beginning work-in-process and 40%
complete as to the ending work-in-process. All materials are added at the end of
the process. Simon Company uses the weighted average method.

The portion of the total cost of ending work-in process attributable to transferred-
in costs is:
A. P -0- C. P1,530
B. P1,500 D. P1,650

31. The Glorious Corporation manufactures only one product in which the raw material
must pass through Processes A, B, and C in that order before completion.

Inventories of Process C and of Finished Goods on October 1 were as follows:

Process C – 1,200 units, 2/3 completed P4,200
Finished goods – 1,000 units at P3.00 per unit

During October the following transactions were completed:

2,000 units with a value of P5,000 were transferred from
Process B.
Direct labor applied to Process C during October was P3,100.
Overhead costs for October applied to Process C were P3,200.

Inventories on October 31 are as follows:

Process C – 600 units, ½ completed
Finished goods – 1,300 units
Using FIFO method, the value of Process C inventory in process for October 31 is:
A. P4,200 C. P5,400
B. P3,500 D. P2,400

32. During March, Bly Company’s Department Y equivalent unit product costs, computed
under the weighted average method were as follows:

Materials P 1
Conversion costs 3
Transferred-in 5
Materials are introduced at the end of the process in Department Y. There were
4,000 units (40% complete as to conversion costs) in WIP at March 31. The total
costs assigned to the March 31 WIP inventory should be:
A. P36,000 C. P27,200
B. P28,800 D. P24,800

III – Lost Units

1. Materials are added at the start of the process in Cedar Company’s blending
department, the first stage of the production cycle. The following information is
available for July.
Units
Work in process, July 1(60% complete
as to conversion costs) 60,000
Started in July 150,000
Transferred to the next department 110,000
Lost in production 30,000
Work in process, July 31 (50% complete
(as to conversion costs) 70,000

Under Cedar’s cost accounting system, the costs incurred on the lost units are
absorbed by the remaining goods units. What are the equivalent units for the
materials unit cost calculation?

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COST ACCOUNTING: PROCESS COSTING AFAR-16
FIFO AVERAGE FIFO AVERAGE
A. 180,000 120,000 C. 180,000 210,000
B. 120,000 180,000 D. 140,000 210,000
2. Using the same information in No. 1, what are the equivalent units for the conversion
cost unit calculation?
FIFO AVERAGE FIFO AVERAGE
A. 145,000 109,000 C. 139,000 175,000
B. 109,000 145,000 D. 109,000 175,000
3. Basic Chemical Industries, Inc. produces product through a continuous process in
different departments (FIFO). Each department has an independent cost accountant
who is tasked with cumulating costs and the preparation of reports for the department
assigned to him. You have been assigned as cost accountant for Department A.
Production data of Department A for the month of September, 2019 were as follows:
Work in process, September 1 14,000 kg.
Percentage of Completion 70%
Started in process 70,000 kg.
Work in Process, September 30 12,000 kg.
Percentage of completion 60%
Lost units (normal) at end of process 2,000 kg.
In this department, costs are applied as follows:
Materials- added at start.
Labor and overhead – evenly distributed.
Department cost incurred in September was:
Materials P56,000
Labor 17,350
Overhead 13,880
Work in process cost, September 1 8,000
Compute the current total unit for materials, labor and overhead.
A. P1.23 C. P1.17
B. P1.04 D. P1.25
4. Using the same information in No. 3, what is the cost of the:
Units transferred Work in Process, September 30
A. P82,390 P9,600
B. 81,890 9,600
C. 72,000 12,840
D. 82,390 12,840
IV – EUP Computations: Normal and Abnormal Loss (Continuous Loss)
The Northern Division of Cagayan Valley Paint produces environmental paints in which
spoilage takes place on a continual basis. Management considers normal spoilage to be
0.5% or less of gallons of material placed into production. The following operating
statistics are available for June 2019 for the paint “ITALIANO”:
Beginning inventory (20% complete as to material;
30% complete as to conversion)…………………………………………… 8,000 gallons
Started during June………………………………………………………………………………………… 180,000 gallons
Ending inventory (60% complete as to material;
70% complete as to conversion)…………………………………………… 4,000 gallons
Spoiled………………………………………………………………………………………………………………………… 1,400 gallons
Determine the following:
1. How many gallons were transferred out?
A. 180,000 C. 182,600
B. 181,200 D. 188,000

2. The normal spoilage occurred:

A. 0 C. 900
B. 500 D. 1,400

3. The abnormal spoilage occurred?

A. 0 C. 900
B. 500 D. 1,400

4. What are the FIFO equivalent units of production for materials? For conversion
costs?
Materials Conversion Materials Conversion
A. 183,900 183,500 C. 185,500 183,500
B. 183,900 185,900 D. 185,500 185,900

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5. What are the Weighted Average Method equivalent units of production for materials?
For conversion costs?
Materials Conversion Materials Conversion
A. 183,900 183,500 C. 185,500 183,500
B. 183,900 185,900 D. 185,500 185,900
6. How should normal spoilage be handled?
A. Product costs C. Allocated between CGS and Expenses
B. Period costs D. Ignore
7. How should abnormal spoilage be handled?
A. Product costs C. Allocated between CGS and Expenses
B. Period costs D. Ignore
V – Normal & Abnormal Lost (End of Process)
Given for a certain process and all materials are added at the start of the production
while conversion costs were applied evenly throughout the production:
Beginning work-in process, 2/5 converted………………………………… 500 units
Transferred-in……………………………………………………………………………………………………… 2,000 units
Normal lost…….…….……………………………………………………………………………………………… 200 units
Abnormal lost……..……………………………………………………………………………………………… 300 units
Goods completed and transferred out……………………………………………… 1,700 units
Ending work in process, 1/3 converted………………………………………… 300 units
Beginning Inventory Added this period
Costs charged to the department:
Costs from preceding department…… P 812.50 P 1,000.00
Materials……………………………………………………………… 750.00 2,000.00
Conversion costs…………………………………………… 610.00 3,990.00
P2,172.50 P 6,990.00
All lost units occur at the end of the process.
1. The equivalent units of production for materials:
FIFO Average FIFO Average
A. 2,500 2,000 C. 2,500 2,500
B. 2,500 2,500 D. 2,000 2,500
2. The equivalent units of production for conversion costs:
FIFO Average FIFO Average
A. 2,300 2,100 C. 2,300 2,300
B. 2,100 2,100 D. 2,100 2,300
3. The materials cost per equivalent unit for:
FIFO Average FIFO Average
A. P1.10 P1.00 C. P1.10 P 1.10
B. 1.00 1.00 D. 1.00 1.10
4. The conversion cost per equivalent unit for:
FIFO Average FIFO Average
A. P2.00 P2.00 C. P2.00 P 1.90
B. 1.90 1.90 D. 1.90 2.00
5. The normal lost per equivalent unit:
FIFO Average FIFO Average
A. P.45 P.40 C. P .40 P .40
B. .45 .45 D. .40 .45
6. The total cost per equivalent unit:
FIFO Average FIFO Average
A. P4.275 P3.800 C. P3.800 P3.800
B. 4.275 4.275 D. 3.800 4.275

7. The total cost transferred to next department:

FIFO Average FIFO Average
A. P7,502.50 P7,267.50 C. P7,267.50 P7,267.50
B. 7,267.50 7,267.50 D. 7,267.50 7,502.50
8. The unit cost transferred to next department:
FIFO Average FIFO Average
A. P4.413 P4.413 C. P4.413 P4.275
B. 4.275 4.275 D. 4.275 4.413
9. The cost of the work-in-process, ending as to preceding department:
FIFO Average FIFO Average
A. P217.50 P150.00 C. P150.00 P217.50
B. 217.50 217.50 D. 150.00 150.00
10. The cost of the work-in-process, ending as to materials:
FIFO Average FIFO Average
A. P330.00 P300.00 C. P300.00 P300.00
B. 330.00 330.00 D. 300.00 330.00

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
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11. The cost of the work-in-process, ending as to conversion costs:
FIFO Average FIFO Average
A. P200.00 P190.00 C. P200.00 P200.00
B. 190.00 190.00 D. 190.00 200.00
12. The cost of the work-in-process, ending:
FIFO Average FIFO Average
A. P640.00 P747.50 C. P747.50 P747.50
B. 640.00 640.00 D. 747.50 640.00
13. The cost of lost units chargeable to product costs:
FIFO Average FIFO Average
A. P680.00 P765.00 C. P1,020.00 P1,147.50
B. 765.00 680.00 D. 1,147.50 1,020.00
14. The cost of lost units chargeable to period costs:
FIFO Average FIFO Average
A. P680.00 P765.00 C. P1,020.00 P1,147.50
B. 765.00 680.00 D. 1,147.50 1,020.00
VI – Normal and Abnormal
Steelman Industries manufactures wood furniture. In the Lamination Department, varnish
is added when the goods are 60 percent complete as to overhead. The units that are
spoiled during processing are found upon inspection at the end of production. Spoilage
is considered discrete.
Production Data for May 2019
Beginning inventory (80% complete as to labor, 70% 2,000 units
complete as to overhead)
Transferred in during month 14,900 units
Ending inventory (40% complete as to labor, 20% complete 3,000 units
as to overhead)
Normal spoilage (found during final quality inspection) 200 units
Abnormal spoilage-found at 30% completion of direct 400 units
labor and 15% of overhead; the sanding machine
was misaligned and scarred the chairs)
All other units were transferred to finished goods
Cost Data for May 2019
Beginning work in process inventory:
Prior department costs P 15,020
Varnish 1,900
Direct labor 4,388
Overhead _11,044 P 32,352
Current period costs:
Prior department costs P137,080
Varnish 14,030
Direct labor 46,000
Overhead 113,564 310,674
Total costs to account for P343,026
1. The equivalent units of production for materials:
FIFO Average FIFO Average
A. 11,500 13,500 C. 11,500 11,500
B. 13,500 11,500 D. 13,500 13,500
2. The equivalent units of production for labor:
FIFO Average FIFO Average
A. 13,220 14,820 C. 14,820 13,220
B. 14,820 14,820 D. 13,220 13,220
3. The equivalent units of production for overhead:
FIFO Average FIFO Average
A. 12,760 14,160 C. 14,160 12,760
B. 14,160 12,760 D. 12,760 12,760
4. The materials cost per equivalent unit for:
FIFO Average FIFO Average
A. P1.22 P1.18 C. P1.18 P 1.22
B. 1.22 1.22 D. 1.18 1.18
5. The labor cost per equivalent unit for:
FIFO Average FIFO Average
A. P3.48 P3.40 C. P3.40 P 3.48
B. 3.48 3.48 D. 3.40 3.40
6. The overhead cost per equivalent unit for:
FIFO Average FIFO Average
A. P8.90 P8.80 C. P8.80 P 9.90
B. 8.90 8.90 D. 8.80 8.80
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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
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7. The cost per equivalent of transferred-in (from preceding department):
FIFO Average FIFO Average
A. P9.20 P9.00 C. P9.00 P 9.20
B. 9.00 9.20 D. 9.00 9.00
8. The total cost per equivalent unit:
FIFO Average FIFO Average
A. P22.80 P22.38 C. P22.38 P22.80
B. 22.80 22.80 D. 22.38 22.32
9. The total cost transferred to next department:
FIFO Average FIFO Average
A. P301,284 P302,130 C. P302,130 P301,284
B. 302,130 302,130 D. 301,284 301,284
10. The unit cost transferred to next department:
FIFO Average FIFO Average
A. P22.65 P22.72 C. P22.72 P22.65
B. 22.65 22.65 D. 22.72 22.72
11. The cost of the work-in-process, ending as to preceding department:
FIFO Average FIFO Average
A. P27,600 P27,000 C. P36,360 P27,600
B. 27,600 27,600 D. 36,360 36,360
12. The cost of the work-in-process, ending as to labor:
FIFO Average FIFO Average
A. P4,176 P4,080 C. P4,080 P4,176
B. 4,176 4,176 D. 4,080 4,080
13. The cost of the work-in-process, ending as to overhead:
FIFO Average FIFO Average
A. P5,340 P5,280 C. P5,280 P5,340
B. 5,340 5,340 D. 5,280 5,280
14. The cost of the work-in-process, ending:
FIFO Average FIFO Average
A. P37,116 P36,360 C. P36,360 P37,116
B. 37,116 37,116 D. 36,360 33,360
15. The cost of lost units chargeable to normal lost:
FIFO Average FIFO Average
A. P4,560 P4,476 C. P4,476 P4,560
B. 4,560 4,560 D. 4,476 4,476
16. The cost of lost units chargeable to abnormal lost:
FIFO Average FIFO Average
A. P4,632 P4,536 C. P4,536 P4,632
B. 4,632 4,632 D. 4,536 4,536

***

*The best way to teach character is to have it around the house.*

*If there be any truer measure of a man than by what he does, it must be by what he
gives.*
*Man for the sake of getting a living forgets to live.*
*The difference between personality and character: Personality is what you are when lots
of people are around;
Character is what you are when everybody goes home*
*No horse gets anywhere until he is harnessed. No life grows great until it is focused,
dedicated, and disciplined.*

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
COST ACCOUNTING: PROCESS COSTING AFAR-16
Solution(s)/Solution Guide
I - Equivalent Production
1.
FIFO Average
Quantity Sched.: Actual WD EP-M Qty Sch.: Actual WD EP-M
IP, beginning 4,000 IP, beg. 4,000
Started In Process 13,000 SIP 13,000
17,000 17,000

Acctd. For As Follows Qty Sch:

IP, beg. F & T 4,000 5/8 2,500 F&T 9,000 100% 9,000
Started, F and T 5,000 100% 5,000 IP,end 4,000 ½ 2,000
In Process, end 4,000 1/2 2,000 4,000 ¾ 3,000
4,000 ¾ 3,000 17,000 14,000
17,000 12,500

2.
FIFO
Quantity Schedule: Actual WD EP-M WD EP-CC
IP, beginning 3,000
Started In Process 25,000
28,000
Accounted For As Follows:
IP, beg. F & T 3,000 100% 3,000 40% 1,200
Started, F and T 17,000 100% 17,000 100% 17,000
In Process, end 8,000 0% _____0 75% 6,000
28,000 20,000 24,200

Average
Quantity Schedule: Actual WD EP-M WD EP-CC
IP, beginning 3,000
Started In Process 25,000
28,000
Accounted For As Follows:
F and T 20,000 100% 20,000 100% 20,000
In Process, end 8,000 0% _____0 75% 6,000
28,000 20,000 26,000

9.
FIFO
Quantity Schedule: Actual WD EP-M WD EP-CC
IP, beginning 25,000
Rec’d from PD/Transferred-In 100,000
125,000
Accounted For As Follows:
IP, beg. F & T 25,000 100% 25,000 40% 10,000
Received , F and T 80,000 100% 80,000 100% 80,000
In Process, end 20,000 0% _____0 80% 16,000
125,000 105,000 106,000

10.
Average
Quantity Schedule: Actual WD EP-M WD EP-CC
IP, beginning 25,000
Rec’d from PD/Transferred-In 100,000
125,000
Accounted For As Follows:
F and T 105,000 100% 105,000 100% 105,000
In Process, end 20,000 0% _____0 75% 16,000
125,000 105,000 121,000

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
COST ACCOUNTING: PROCESS COSTING AFAR-16
II – Cost Analysis
FIFO
Quantity Schedule: Actual WD EP-M WD EP-CC
IP, beginning 6,000
Rec’d from PD/Transferred-In 14,000
20,000
Accounted For As Follows:
IP, beg. F & T 6,000 -0- -0- 50% 3,000
Received , F and T 6,000 100% 6,000 100% 6,000
In Process, end _8,000 100% 8,000 75% 6,000
20,000 14,000 15,000

Average
Quantity Schedule: Actual WD EP-M WD EP-CC
IP, beginning 6,000
Rec’d from PD/Transferred-In 14,000
20,000
Accounted For As Follows:
F and T 12,000 100% 12,000 100% 12,000
In Process, end _8,000 100% _8,000 75% _6,000
20,000 20,000 18,000

1. 3.
2. 4.
Nos. 5-12: FIFO
Quantity Schedule: Actual WD EP-M WD EP-CC
IP, beginning
Rec’d from PD/Transferred-In

Accounted For As Follows:

IP, beg. F & T
Received , F and T
In Process, end

5. 7. 9. 11.
6. 8. 10. 12.
Nos. 13-19: Average
Quantity Schedule: Actual WD EP-M WD EP-CC
IP, beginning
Rec’d from PD/Transferred-In

Accounted For As Follows:

F and T
In Process, end

13. 15. 17. 19.

14 . 16. 18.

Problem III -
1. B
2. B
FIFO
Quantity Schedule: Actual WD EP-M WD EP-CC
IP, beginning 60,000
Started In Process 150,000
210,000

Accounted For As Follows:

IP, beg. F & T 60,000 0 0 40% 24,000
Started, F and T 50,000 100% 50,000 100% 50,000
In Process, end 70,000 100% 70,000 50% 35,000
Normal lost 30,000 0 _____ 0 ____0
210,000 120,000 109,000

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
COST ACCOUNTING: PROCESS COSTING AFAR-16
Average
Accounted For As Follows:
F and T 110,000 100% 110,000 100% 110,000
In Process, end 70,000 100% 70,000 1/5 35,000
Normal lost 30,000 0 _____ 0 ____0
210,000 180,000 145,000
3. D – (P56,000/70,000 EUP-Mat) = P.80 + [(P17,350+P13,880)/69,400] = P.45
FIFO
Quantity Schedule: Actual WD EP-M WD EP-CC
IP, beginning 14,000
Started In Process 70,000
84,000
Accounted For As Follows:
IP, beg. F & T 14,000 0 0 30% 4,200
Started, F and T 56,000 100% 56,000 100% 56,000
In Process, end 12,000 100% 12,000 60% 7,200
Normal lost (end) _2,000 100% __2,000 100% __2,000
84,000 70,000 69,400
4. D
Units transferred:
In process, beginning:
Cost last month (given) P 8,000
Cost this month: M – P.80 x 0 P -0-
CC – P.45 x 4,200 1,890 1,890 P 9,890
NL: 2,000 x (P.80+P.45) 2,500
Transferred: 56,000 x P1.25 70,000
Total transferred P82,390
In process, end:
CPD: P -0-
CTD: (12,000 x P.80) + (7,200 x P.45) 12,840 P 12,840
Problem IV -
1. C 3. B 5. D 7. B
2. C 4. A 6. B
FIFO
Quantity Schedule: Actual WD EP-M WD EP-CC
IP, beginning 8,000
Started In Process 180,000
188,000
Accounted For As Follows:
IP, beg. F & T 8,000 80% 6,400 70% 5,600
Started, F and T 174,600 100% 174,600 100% 174,600
In Process, end 4,000 60% 2,400 70% 2,800
Normal lost 900 0 0 0 0
Abnormal lost ___500 ____500 ___500
188,000 183,900 183,500
Average
Accounted For As Follows:
F and T 182,600 100% 182,600 100% 182,600
In Process, end 4,000 60% 2,400 70% 2,800
Normal lost 900 0 0 0 0
Abnormal lost ___500 ___500 ___500
188,000 185,500 185,900
V – Normal (Discrete – End) and Abnormal Lost Units (Continuous/Discrete – end)
FIFO
Quantity Schedule: Actual WD EP-M WD EP-CC
IP, beginning 500
Rec’d from PD/Transferred-In 2,000
2,500
Accounted For As Follows:
IP, beg. F & T 500 0 0 3/5 300
Received , F and T 1,200 100% 1,200 100% 1,200
In Process, end 300 100% 300 1/3 100
NL 200 100% 200 100% 200
AL 300 100% 300 100% 300
2,500 2,000 2,100

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
COST ACCOUNTING: PROCESS COSTING AFAR-16
Average
Quantity Schedule: Actual WD EP-M WD EP-CC
IP, beginning 500
Rec’d from PD/Transferred-In 2,000
2,500
Accounted For As Follows:
F and T 1,700 100% 1,700 100% 1,700
In Process, end 300 100% 300 1/3 100
NL 200 100% 200 100% 200
AL 300 100% 300 100% 300
2,500 2,500 2,300

Problem VI– Discrete Lost : Normal and Abnormal - FIFO vs. Average
FIFO
Quantity Schedule: Actual WD EP-M WD EP- WD EP-OH
Labor
IP, beginning 2,000
Rec’d from Pre. Dept./T-in 14,900
16,900

Accounted For As Follows:

IP, beg. F & T 2,000 0 0 80 400 30% 600
R, F and T 11,300 100% 11,300 100% 11,300 100% 11,300
In Process, end 3,000 0 0 40% 1,200 20% 600
Normal lost 200 100% 200 100% 200 100% 200
Abnormal lost ___400 0 ____0 30% 120 15% ____60
16,900 11,500 13,220 12,760

Total TI/RPD Material Labor OH__

Beginning inv. 32,352
Current costs 310,674 137,080 14,030 46,000 113,564
Total 343,026
Divide by EUP 14,900 11,500 13,220 12,760
Cost per EUP 22.80 9.20 1.22 3.48 8.90

Cost Assignment
Transferred out
Beginning inventory 32,352
Complete BI:
Labor (400 × 3.48) 1,392
Overhead (600 × 8.90) 5,340 37,880
R, F and T (11,300 × 22.80) 257,640
Normal spoilage (200 × 22.80) 4,560 262,200 301,284
Ending inventory:
Transferred in (3,000 × 9.20) 27,600
Labor (1,200 × 3.48) 4,176
Overhead (600 × 8.90) 5,340 37,116
Abnormal spoilage Expense
Transferred in (400 × 9.20) 3,680
Labor (120 × 3.48) 418
Overhead (60 × 8.90) 534 4,632
Total costs accounted for 343,032*
Cost Assignment
Transferred out
Beginning inventory 32,352
Complete BI:
Labor (400 × 3.48) 1,392
Overhead (600 × 8.90) 5,340 37,880
R, F and T (11,300 × 22.80) 257,640
Normal spoilage (200 × 22.80) 4,560 262,200 301,284

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
COST ACCOUNTING: PROCESS COSTING AFAR-16
Ending inventory:
Transferred in (3,000 × 9.20) 27,600
Labor (1,200 × 3.48) 4,176
Overhead (600 × 8.90) 5,340 37,116
Abnormal spoilage Expense
Transferred in (400 × 9.20) 3,680
Labor (120 × 3.48) 418
Overhead (60 × 8.90) 534 4,632
Total costs accounted for 343,032*
* Note that total costs accounted for differs from total costs to account for because
of rounding.
Finished Goods Inventory 301,284
Loss on Abnormal Spoilage 4,632
WIP Inventory-Lamination 305,916
Average
Quantity Schedule: Actual WD EP-M WD EP- WD EP-OH
Labor
IP, beginning 2,000
Rec’d from Pre. Dept./T-in 14,900
16,900

Accounted For As Follows:

F and T 13,300 100% 13,300 100% 13,300 100% 13,300
In Process, end 3,000 0 0 40% 1,200 20% 600
Normal lost 200 100% 200 100% 200 100% 200
Abnormal lost ___400 0 ____0 30% __120 15% ____60
16,900 13,500 14,820 14,160
Units Trans. In Material Labor OH
BI completed 2,000 2,000 2,000 2,000 2,000
Units S & C 11,300 11,300 11,300 11,300 11,300
Ending inventory 3,000 3,000 0 1,200 600
Normal spoilage 200 200 200 200 200
Abnormal spoilage 400 400 0 120 60
Units accounted for 16,900 16,900 13,500 14,820 14,160
Total Trans. In Material Labor OH
Beginning inv. 32,352 15,020 1,900 4,388 11,044
Current costs 310,674 137,080 14,030 46,000 113,564
Total 343,026 152,100 15,930 50,388 124,608
Divide by EUP 16,900 13,500 14,820 14,160
Cost per EUP 22.38 9 1.18 3.40 8.80
Cost Assignment
Transferred out
Good units (13,300 × 22.38) 297,654
Normal spoilage (200 × 22.38) 4,476 302,130
Ending inventory:
Transferred in (3,000 × 9) 27,000
Labor (1,200 × 3.40) 4,080
Overhead (600 × 8.80) 5,280 36,360
Abnormal spoilage
Transferred in (400 × 9) 3,600
Labor (120 × 3.40) 408
Overhead (60 × 8.80) 528 4,536
Total costs accounted for 343,026
Finished Goods Inventory 302,130
WIP Inventory-Lamination 302,130
Loss on Abnormal Spoilage 4,536
WIP Inventory-Lamination 4,536

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