Direct labor 40000 eup x 10080 per eup 4032000 total

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Direct labor (40,000 EUP x $100.80 per EUP) .... 4,032,000 Total costs transferred out ................................. $5,432,000 Cost of ending goods in process Direct materials (4,000 EUP x $35.00 per EUP). 140,000 Direct labor (1,000 EUP x $100.80 per EUP) ...... 100,800 Total costs of ending goods in process ............ 240,800 Total costs accounted for* ................................... $5,672,800 *This equals the sum of the total direct materials cost and the total direct labor costs ($1,540,000 + $4,132,800 = $5,672,800). 3-36
Chapter 03 - Process Costing and Analysis Problem 3-2B (Concluded ) Part 4 MEMORANDUM TO: FROM: DATE: RE: Percentage of Completion Error Analysis If the units in ending inventory are actually 75% complete instead of 30% with respect to labor, the number of equivalent units in ending inventory with respect to labor is understated, and the total equivalent units produced for the period is also understated. If the correct percentage of completion with respect to labor (75%) were used, the direct labor cost per equivalent unit would be smaller. This would decrease the total cost of goods transferred out. The total cost of ending goods in process would increase due to the larger number of equivalent units of labor remaining in ending inventory. Regarding financial statements, this error causes an overstatement of cost of goods sold and an understatement of net income on the income statement for April. On the April 30 balance sheet, the goods in process inventory and retained earnings are understated; therefore total assets and equity are also understated. 3-37
Chapter 03 - Process Costing and Analysis Problem 3-3B (60 minutes) Part 1 a. Mar. 31 Raw Materials Inventory ............................... 110,560 Accounts Payable .................................... 110,560 Raw materials purchased. b. Mar. 31 Goods in Process Inventory ......................... 98,560 Raw Materials Inventory .......................... 98,560 Direct materials used in production. c. Mar. 31 Factory Overhead .......................................... 20,280 Raw Materials Inventory .......................... 20,280 Indirect materials used. d. Mar. 31 Factory Payroll .............................................. 80,000 Cash .......................................................... 80,000 Factory payroll costs. e. Mar. 31 Goods in Process Inventory ......................... 61,840 Factory Payroll ......................................... 61,840 Direct labor used in production. f. Mar. 31 Factory Overhead .......................................... 18,160 Factory Payroll ......................................... 18,160 Indirect labor used. g. Mar. 31 Factory Overhead .......................................... 17,216 Other Accounts ........................................ 17,216 Other overhead costs. h. Mar. 31 Goods in Process Inventory ......................... 55,656 Factory Overhead .................................... 55,656 Application of overhead at 90% of direct labor cost. 3-38
Chapter 03 - Process Costing and Analysis Problem 3-3B (Continued ) i. Mar. 31 Finished Goods Inventory ............................. 195,520 Goods in Process Inventory .................... 195,520 Transfer goods to finished goods. j. Mar. 31 Cash ............................................................... 1,125,000 Sales ......................................................... 1,125,000 Sales of finished goods. (45,000 x $25) Mar. 31 Cost of Goods Sold ....................................... 225,000 Finished Goods Inventory ....................... 225,000 Cost of goods sold. Part 2 YING COMPANY Process Cost Summary For Month Ended March 31 Costs charged to production Costs of beginning goods in process Direct materials ............................................................... $ 2,240 Direct labor ...................................................................... 1,410 Factory overhead ............................................................. 1,269 $ 4,919 Costs incurred this period Direct materials ............................................................... 98,560 Direct labor ...................................................................... 61,840 Factory overhead ............................................................. 55,656 216,056 Total costs to account for ................................................. $220,975 Unit cost information Units to account for Units accounted for Beginning goods in process.. 8,000 Co mpleted & transferred out . 26,000 Units started this period ......... 24,000 Ending goods in process ...... 6,000 Total units to account for ....... 32,000 Total units accounted for ...... 32,000 [Continued on next page] 3-39
Chapter 03 - Process Costing and Analysis Problem 3-3B (Concluded ) Equivalent units of production Direct

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