CMA1 – PROCESS COSTING – SUPPLEMENTARY PROBLEMS – MULTIPLE
- Process Costing with Second Department
When the Production Report is for a processing department that is not the first department in the
process, there is a separate cost category and unit category called
This category is treated the same as the other categories (DM, DL, and MO) with a separate column
in the EU calculations.
Transferred in costs are always 100% complete when they are transferred in.
Hence, when using
the FIFO method, EU’s required to complete the transferred-in costs in WIP beginning
Likewise, the WIP ending inventory for transferred in costs will always be 100%
In the third schedule,
Costs to Account For
second line becomes
Costs Transferred in or
Added this period
with the transferred in-costs being in a separate Transferred-in column and the
costs added this period being in the DM, DL, and MO columns.
The transferred in costs and related EU’s become part of the cost per EU calculation.
When preparing the
Cost Reconciliation (Costs Accounted for as Follows Schedule
additional line and calculation under the WIP ending
heading will be
Transferred in cost
will be equal to the number of transferred in EU’s in ending WIP from Schedule 2, times the cost
per EU for transferred in costs
(the others being the DM, DL, and MO components of ending WIP).
Supplementary Problems -
Weighted – average method (first department)
Global Defense, Inc. is a manufacturer of military equipment. Its Halifax plant manufactures the Interceptor
missile under contract to the Canadian government and friendly countries. All Interceptors go through an
identical manufacturing process. Every effort is made to ensure that all Interceptors are identical and meet
many demanding performances specifications. The product-costing system at the Halifax plant has a single
direct cost category (direct materials) and a single indirect cost category (conversion costs). Each Interceptor
passes through two departments – the Assembly Department and the Testing Department. Direct materials
are added at the beginning of the process in Assembly. Conversion costs are added evenly throughout the
two departments. When the Assembly Department finishes work on each Interceptor, it is immediately
transferred to Testing.
Global Defense uses the weighted-average method of process costing. Data for the Assembly
Department for October 2009 are:
Work in process, October 1*
Started during October 2009
Completed during October 2009
Work in process, October 31
Costs are added during October 2009