Cost Accounting 1

17-19 Penn Manufacturing Corporation uses a process-costing system to manufacture printers for PCs.
The following information summarizes operations for its NoToner model during the quarter ending
September 30, Year 1:
Units Direct Labor
Work-in-process inventory, July 1 100 $ 50,000
Started during the quarter 500
Completed during the quarter 400
Work-in-process inventory, September 30 200
Costs added during the quarter $775,000
Beginning work-in-process inventory was 50% complete for direct labor. Ending work-inprocess
inventory was 75% complete for direct labor. What is the total value of the direct labor in the ending
work-in-process inventory using the weighted-average method? 1. $183,000 2. $194,000 3. $225,000 4.
$210,000
SOLUTION
Choice "3" is correct. In this question, they want a calculation of ending inventory cost using the
weighted average method of process costing. The general approach to this problem is to (1) compute
the equivalent units; (2) compute the unit cost of the production; and (3) apply the unit cost to the
equivalent units in the ending inventory.
Before computing the equivalent units, it is helpful to reconcile the actual units. 100 units were in
beginning inventory and 500 units were started, for a total of 600 units. 400 units were completed and
200 units remained in ending inventory, again for a total of 600 units.
Converting to equivalent units using the weighted-average method, the units completed at 100 percent
complete and the units in ending inventory at their percentage of completion are considered. Equivalent
units were thus 550 [400 + (200 × 0.75)]. Using the weighted average method, the percentage of
completion of the beginning inventory is not considered.
To compute the unit cost of production, the cost of the beginning inventory plus the cost added during
the month are considered. The cost of the beginning inventory was $50,000. $775,000 of cost was
added during the month, for a total of $825,000 ($50,000 + $775,000). The per equivalent unit cost is
$1,500 ($825,000 / 550).
There were 150 equivalent units in ending inventory (200 × 0.75). The cost of this inventory was thus
$225,000 ($1,500 × 150).
17-20 Kimberly Manufacturing uses a process-costing system to manufacture Dust Density Sensors for
the mining industry. The following information pertains to operations for the month of May, Year 5.
Units
Beginning work-in-process inventory, May 1 16,000
Started in production during May 100,000
Completed production during May 92,000
Ending work-in-process inventory, May 31 24,000
The beginning inventory was 60% complete for materials and 20% complete for conversion costs. The
ending inventory was 90% complete for materials and 40% complete for conversioncosts. Costs
pertaining to the month of May are as follows.  Beginning inventory costs are: materials, $54,560;
direct labor $20,320; and factory overhead, $15,240.  Costs incurred during May are: materials used,
$468,000; direct labor, $182,880; and factory overhead, $391,160.
Using the weighted-average method, the equivalent-unit conversion cost for May is: 1. $5.65 2. $5.83
3. $6.00 4. $6.41
SOLUTION
Choice 3
$6.00 equivalent unit conversion cost using the weighted-average method.
Weighted-average equivalent units: Units completed (given) 92,000 + Ending WIP × % completed =
24,000 × 40% = 9,600 Weighted-average equivalent units 101,600
Weighted-average cost per equivalent unit: = Beginning cost + Current cost / Equivalent units =
($20,320 + $15,240) + ($182,880 + $391,160) / 101,600 = $6.00.
17-41 Weighted-average method. McKnight Handcraft is a manufacturer of picture frames for large
retailers. Every picture frame passes through two departments: the assembly department and the
finishing department. This problem focuses on the assembly department. The processcosting system at
McKnight has a single direct-cost category (direct materials) and a single indirect-cost category
(conversion costs). Direct materials are added when the assembly department process is 10% complete.
Conversion costs are added evenly during the assembly department’s process. McKnight uses the
weighted-average method of process costing. Consider the following data for the assembly department
in April 2017:
Physical Unit (Frames) Direct Materials Conversio n Cost
Work in process, April 1a 60 $1,530 $ 156
Started during April 2017 510
Completed during April 2017 450
Work in process, April 30b 120
Total costs added during April 2017 $17,850 $11,544
aDegree of completion: direct materials, 100%; conversion costs, 40%.
bDegree of completion: direct materials, 100%; conversion costs, 15%.
1. Solution Exhibit 17-41A shows equivalent units of work done to date of:
Direct materials 570 equivalent units Conversion costs 468 equivalent units Note that direct materials
are added when the Assembly Department process is 10% complete. Both the beginning and ending
work in process are more than 10% complete and hence are 100% complete with respect to direct
materials. Solution Exhibit 17-41B summarizes the total Assembly Department costs for April 2017,
calculates cost per equivalent unit of work done to date for direct materials and conversion costs, and
assigns these costs to units completed (and transferred out), and to units in ending work in process
using the weighted-average method.

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17-19 Penn Manufacturing Corporation uses a process-costing system to manufacture printers for PCs.

Units Direct Labor

Work-in-process inventory, July 1 100 $ 50,000

Started during the quarter 500

Completed during the quarter 400

Work-in-process inventory, September 30 200

Costs added during the quarter $775,000

Beginning work-in-process inventory, May 1 16,000

Started in production during May 100,000

Completed production during May 92,000

Ending work-in-process inventory, May 31 24,000

$6.00 equivalent unit conversion cost using the weighted-average method.

Work in process, April 1a 60 $1,530 $ 156

Started during April 2017 510

Completed during April 2017 450

Work in process, April 30b 120

Total costs added during April 2017 $17,850 $11,544

aDegree of completion: direct materials, 100%; conversion costs, 40%.

bDegree of completion: direct materials, 100%; conversion costs, 15%.

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