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CHAPTER 6
DISCUSSION QUESTIONS

Q6-1. The basic objective of process costing is to
determine the costs of the products manufactured by the company. Determining the cost of
the products manufactured is necessary in
order to properly cost ending inventories for
external reporting purposes (i.e., reporting to
creditors and owners of the company, the
SEC, and the IRS) and to evaluate the profitability of the manufacturing activity. In order
to cost products, the costs must be determined for materials, labor, and factory overhead used to process each unit of product
through each department.
Q6-2. The products manufactured within a department (or cost center) during the period can be
heterogeneous if job order costing is used,
but must be homogeneous if process costing
is used. In job order costing, products are
accounted for in batches. The cost of each
unit of product manufactured on a job is determined by dividing the total cost charged to the
job by the number of units produced on the
job. Since the manufacturing cost of each job
is accounted for separately, accurate and
useful product cost can be determined even
when the products manufactured on different
jobs are substantially different. By contrast, in
process costing, all manufacturing costs are
charged to the department, and the unit cost
is determined by dividing the cost charged to
the department by the number of units produced. As a consequence, the units of product manufactured within a department must
be essentially alike in order for the cost allocated to each unit to be meaningful (i.e., to

engaged in completing the desired product.
Q6-5. Materials Costs—In job order costing, materials requisitions are used and charges are
made to jobs; in process costing, charges for
materials issued to production are made to
departments, with infrequent use of materials
requisitions.
Labor Costs—Time tickets are used in job
order costing to accumulate labor costs for
each job; in process costing, labor costs are
charged to departments, and, therefore,
detailed time records are not necessary.
Factory Overhead—Job order costing
requires the use of predetermined rates for
charging overhead to jobs; in process costing,
actual overhead may be used. (However, predetermined rates are often used in order to
smooth overhead that is not incurred at the
same rate as production activity.)
Summarizing Costs—A job order cost sheet is
used to accumulate the costs of an order in job
order costing; a cost of production report is
used in process costing. In job order costing,
costs are summarized on completion of the
job; in process costing, costs charged to the

6-1


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6-2

Chapter 6

products, prepare journal entries to record the
transfer of costs between departments, and
control costs.
Q6-8. The sections commonly found in a cost of production report are: (a) a quantity schedule
indicating the source and disposition of the
units of product, (b) a cost charged to the
department section, indicating the cost in total
and per unit for the cost transferred in from
the preceding department, as well as materials, labor and overhead charged to the
department, and (c) a cost accounted for section indicating the amount of cost assigned to
the units transferred out of the department, as
well as the cost of ending inventory.
Q6-9. Separate departmental cost of production
reports are used to accumulate costs more
accurately and to provide more detailed data
for cost control purposes than a plant-wide
cost of production report could provide. In
some cases (e.g., a manufacturing plant that
has a selective production flow for its products), a plant-wide cost of production report
cannot be used.
Q6-10. An equivalent unit of production is the amount
of a resource (e.g., materials, labor, or overhead) that would be required to complete one
unit of the product with respect to the cost element being considered. The total number of
equivalent units, with respect to a particular
element of cost, represents the number of
units of the product that could have been
completed with the resources used during the
period.

Department

20,000

Materials

Labor

Factory
Overhead

20,000

20,000

20,000

5,000
5,000
4,000
25,000
Cost from
Preceding
Department

0
$40,000
$40,000
25,000
$ 1.60


Factory
Overhead

0
$16,330
$16,330
23,000
$
.71

50,000
40,000
90,000

Work in Process—Department X .............................................
Work in Process—Department Y .............................................
Payroll ............................................................................

80,000
70,000

Work in Process—Department X .............................................
Work in Process—Department Y .............................................
Factory Overhead ........................................................

180,000
70,000

Work in Process—Department Y .............................................

Beginning inventory................................
Started in process this period ...............
Transferred to Assembling Department
Ending Inventory .....................................

Materials

Labor

75%

40%

Overhead

25%

Quantity
800
3,200
4,000
3,400
600
4,000

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

3,550

$22.48
4.70
9.52

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

Units
3,400
600
600
600

$36.70

%
Complete Unit Cost
100%
$36.70
75%
40%
25%


3,400
150
3,550

** 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 6

E6-4

6-5

Tokyo Manufacturing Company
Molding Department
Cost of Production Report
For August

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

Materials

75%


Equivalent
Units*

Unit
Cost**

Cost added during current period:
Materials .....................................................................................
Labor...........................................................................................
Factory overhead.......................................................................

$39,980
12,638
18,779

9,800
9,400
9,400

$4.50
1.40
2.10

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

$71,397
$77,000


2.10

$2,700
280
420

3,400
$77,000

*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
9,200
600
9,800

Labor
9,200
200
9,400

Overhead
9,200
200
9,400



Overhead

30%

Quantity
1,400
4,600
6,000
5,000
1,000
6,000

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

Total
Cost
$ 21,120
5,880
2,614
5,228
$ 34,842

Equivalent

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

Units
5,000

%
Complete
100%

Unit Cost
$31.00

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

100%
60%
30%
30%

$14.90

5,600

Labor
5,000
300
5,300

Overhead
5,000
300
5,300

** 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 6

E6-6

6-7

Sonneli Corporation
Assembly Department
Cost of Production Report
For February

Quantity Schedule

4,000
1,200
2,400
$19,400

Cost added during current period:
Cost from preceding department.............................................
Materials .....................................................................................
Labor ..........................................................................................
Factory overhead ......................................................................
Total cost added during current period ..........................
Total cost charged to department ..................................................

$63,200
21,200
17,660
35,320
$137,380
$156,780

Cost Accounted for as Follows
Transferred to Finished Goods ..............
Work in Process, ending inventory:
Cost from preceding department ....
Materials ............................................
Labor ..................................................
Factory overhead ..............................
Total cost accounted for.........................

Units

%
Complete Unit Cost
100%
$65.10
100%
80%
60%
60%

$30.00
10.50
8.20
16.40

Total Cost
$130,200
$15,000
4,200
2,460
4,920

26,580
$156,780

*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..............................


Chapter 6

Saleri Manufacturing Corporation
Forming Department
Cost of Production Report
For June

Quantity Schedule
Beginning inventory................................
Received from Cutting Department.......
Transferred to Finishing Department ....
Ending inventory .....................................

Material A

100%

Material B

0%

Labor

30%

Overhead

30%

Quantity


Cost added during current period:
Cost from preceding department.............................................
Material A ...................................................................................
Material B ...................................................................................
Labor...........................................................................................
Factory overhead ......................................................................
Total cost added during current period............................
Total cost charged to department ..................................................

$ 29,328
19,695
10,250
15,630
23,445
$ 98,348
$108,700

4,500
4,500
4,100
4,220
4,220

$ 7.50
5.00
2.50
4.00
6.00


$7.50
5.00
2.50
4.00
6.00

Total Cost
$102,500
$3,000
2,000
0
480
720

6,200
$108,700

*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..............................

Prior Dept.
Cost
Material A
4,100
4,100
400
400

Canoli Cola Company
Carbonation Department
Cost of Production Report
For October

Quantity Schedule
Beginning inventory ................................................
Received from Syrup Department ..........................
Added to process in Carbonation Department .....
Transferred to Bottling Department .......................
Ending inventory ......................................................

Materials

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 ..................................................

Cost
$ 1,120
140
65
120
$ 1,445

Equivalent
Units*

Unit
Cost**

$ 9,680
1,210
1,960
3,120
$15,970
$17,415

9,000
9,000
8,100
8,100

$1.20
.15
.25
.40
$2.00


*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..............................

Prior Dept.
Cost
Materials
7,800
7,800
1,200
1,200
9,000
9,000

Labor
7,800
300
8,100

Overhead
7,800
300
8,100

** 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


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 Finishing Department ....
Work in Process, ending inventory:
Cost from preceding department ....
Materials ............................................
Labor ..................................................
Factory overhead ..............................
Total cost accounted for.........................

Units
26,000
4,000
4,000
4,000
4,000

Labor

Overhead


30,000
29,200
29,600

$1.00
.51
.10
.30
$1.91

%
Complete Unit Cost
100%
$1.91
100%
100%
80%
90%

Quantity
5,000
20,000
5,000
30,000

$1.00
.51
.10
.30



Overhead
26,000
3,600
29,600

** 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 6

6-11

E6-10 APPENDIX
Shankar Manufacturing Company
Cutting Department
Cost of Production Report
For July
Quantity Schedule
Beginning inventory................................
Started in process this period ...............
Transferred to Assembly Department ...
Ending inventory .....................................

Materials
60%


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

Units

Overhead
20%

50%

Total
Cost
$2,940
390
585
$3,915
$46,530
18,860
27,150
$92,540
$96,455

Quantity
100
900
1,000
850
150


$49.50
20.50
30.00
100.00

1,980
1,640
2,400

$ 9,935
75,000
$84,935

150
150
150

100%
60%
50%

$49.50
20.50
30.00

$7,425
1,845
2,250


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6-12

Chapter 6

E6-11 APPENDIX
Cantach Tool Company
Assembly Department
Cost of Production Report
For November
Quantity Schedule
Beginning inventory................................
Received from Cutting Department.......
Transferred to Finished Goods ..............
Ending inventory .....................................

Materials
50%

90%

Labor
40%

80%

Cost Charged to Department
Beginning inventory:
Cost from preceding department...........................................

3,600
$ 28,830

Equivalent
Units*

Unit
Cost**

$ 40,600
29,700
16,932
25,398
$112,630
$141,460

2,800
3,300
3,320
3,320

$14.50
9.00
5.10
7.65
$36.25


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1,200
1,800

50%
60%
60%
100%

$9.00
5.10
7.65
36.25

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

100%
90%
80%
80%

$14.50
9.00
5.10
7.65

5,400
3,672

2,800
3,300

Labor
720
1,800
800
3,320

Overhead
720
1,800
800
3,320

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


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6-14

Chapter 6

E6-12 APPENDIX
Southwell Chemical Corporation
Blending Department
Cost of Production Report
For May
Quantity Schedule


Overhead
40%

80%

Quantity
2,000
5,000
5,000
12,000
10,500
1,500
12,000

Total
Cost
$2,460
500
150
600
$3,710

Equivalent
Units*

Unit
Cost**

$12,500

Labor ....................................
Factory overhead .................
Started and completed this period
Total cost transferred to Finished
Goods ..........................................
Work in Process, ending inventory:
Cost from preceding department ....
Materials ............................................
Labor ..................................................
Factory overhead ..............................
Total cost accounted for ........................

Units

Current % Unit Cost

Total Cost
$3,710

2,000
2,000
2,000
8,500

0%
80%
60%
100%

$ .25

840

3,360
$29,640

*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
0
8,500
8,500
1,500
1,500
10,000
10,000

Labor
1,600
8,500
900
11,000


Materials

90%.

Labor

60%

Cost Charged to Department
Beginning inventory:
Materials .....................................................................................
Labor...........................................................................................
Factory overhead.......................................................................
Total cost in beginning inventor........................................
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 Assembly Department ...
Work in Process, ending inventory:
Materials ............................................
Labor ..................................................
Factory overhead ..............................
Total cost accounted for.........................

Units


785
740
740

$40.00
12.00
18.00

$ 40.00
12.00
18.00
$ 70.00

%
Complete Unit Cost
100%
$70.00
90%
60%
60%

Unit
Cost**

Total Cost
$45,500
$5,400
1,080
1,620


Chapter 6

6-17

P6-1 (Continued)
Meninquez Cabinet Company
Assembly Department
Cost of Production Report
For August
Quantity Schedule
Beginning inventory................................
Received from Cutting Department.......
Transferred to Finished Goods ..............
Ending inventory .....................................

Materials

Labor

Overhead

40%

20%

20%

Cost Charged to Department
Beginning inventory:

900
800
100
900
Equivalent
Units*

900
840
820
820

Unit
Cost**

$ 69.90
21.10
30.00
30.00
$151.00


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6-18

Chapter 6

P6-1 (Concluded)


Total Cost
$120,800
$6,990
844
600
600

9,034
$129,834

*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 .......................

Prior Dept.
Cost
Materials
800
800
100
40
900
840

Labor
800
20
820

20,989

Work in Process—Assembly Department ..................
Work in Process—Cutting Department .............

45,500

Finished Goods Inventory ...........................................
Work in Process—Assembly Department ........

120,800

40,308

29,339

33,514
45,500
120,800


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Chapter 6

P6-2
(1)

6-19


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

Quantity

Units
7,500
1,500
1,500
1,500

80%

7,500
1,500
9,000


100%
$3.25
100%
80%
80%

$2.00
.50
.75

Total Cost
$24,375
$3,000
600
900

4,500
$28,875

*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
7,500
1,500
9,000



Beginning inventory
Received from Casting Department .........................
Transferred to Finished Goods ................................
Ending inventory ........................................................

Quantity
1,500
7,500
9,000

40%

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

50%

7,000
2,000


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Chapter 6

6-21

P6-2 (Concluded)
Cost Accounted for as Follows
Transferred to Finished Goods ..............
Work in Process, ending inventory:
Cost from preceding department ....
Labor ..................................................
Factory overhead ..............................
Total cost accounted for.........................

Units
7,000
2,000
2,000
2,000

%
Complete Unit Cost
100%
$4.10
100%
40%
50%


Overhead
7,000
1,000
8,000

** 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—Casting Department......................
Materials ..............................................................

17,085

Work in Process—Casting Department......................
Work in Process—Finishing Department...................
Payroll ..................................................................

4,290
2,919

Work in Process—Casting Department......................
Work in Process—Finishing Department...................
Applied Factory Overhead..................................

6,435
3,125

Work in Process—Finishing Department...................

For February

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

Materials

100%

Labor

80%

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

$ 14,102

Equivalent
Units*

$146,575
16,362
48,461
$211,398
$225,500

3,500
3,340
3,420

%
Complete Unit Cost
100%
$65.00
100%
80%
90%

$45.00
5.00
15.00

Unit
Cost**


Labor
2,700
640
3,340

Overhead
2,700
720
3,420

** 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 6

6-23

P6-3 (Continued)
Jetter Engine Corporation
Assembly Department
Cost of Production Report
For February
Quantity Schedule
Beginning inventory................................
Received from Casting Department .....
Transferred to Finishing Department ....
Ending inventory .....................................

Factory overhead ..............................
Total cost accounted for.........................

Units
2,900
800
800
800
800

Overhead

30%

Quantity
1,000
2,700
3,700
2,900
800
3,700

Total
Cost
$ 63,150
40,258
12,426
12,426
$128,260


30%
30%

$

64.50
45.30
18.10
18.10

Total Cost
$423,400
$51,600
25,368
4,344
4,344

85,656
$509,056

*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..............................

Prior Dept.
Cost
Materials
2,900

For February
Quantity Schedule
Beginning inventory ...................................................
Received from Assembly Department ......................
Transferred to Finished Goods ................................
Ending inventory.........................................................

Labor

50%

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

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

$423,400
12,240
18,360
$454,000
$503,740

3,200
3,000
3,000

$ 145.70
5.00
7.50

$ 145.70
5.00
7.50
$ 158.20

%
Complete Unit Cost
100%
$ 158.20
100%
50%
50%

Unit
Cost**



** 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 6

6-25

P6-3 (Concluded)
(2)

Work in Process—Casting Department......................
Work in Process—Assembly Department ..................
Materials ...............................................................

146,575
116,480

Work in Process—Casting Department......................
Work in Process—Assembly Department ..................
Work in Process—Finishing Department...................
Payroll ..................................................................

16,362
44,408
12,240


423,400
442,960