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## Hard Practice Test

Problems only: No additional multiple-choice questions are necessary

1. Ready to Roll, Inc. makes rolling pins and uses weighted average process costing. The company began the current month with 1,000 pins in process that were 60% complete as to material and 35% complete as to conversion. During the month, 45,800 rolling pins were started. At the end of the month, 700 pins were still in process (60% complete as to material and 80% complete as to conversion). Normal spoilage is 5% of units started. Spoiled units totaled 3,500 during the period. The company does not inspect during the process. Cost information for the month follows:

 Material Conversion Beginning Inventory \$13,181 \$  6,732 Added this period \$66,970 \$29,040

A. Compute average cost per equivalent unit.
B. Determine the value of spoilage.
C. Record all necessary journal entries.

A. 1st – Prepare the equivalent units schedule:

Normal spoilage = 5% x units started of 45,800 = 2,290 gallons
Abnormal spoilage = total spoilage 3,500 – normal spoilage 2,290 = 1,210

Equivalent units schedule – Weighted Average

 Quantity Went in during the period: Beginning Inventory 1,000 +Started In to Production 45,800 =Total Units to be accounted for: 46,800
 Equivalent Units Quantity Material Conversion Came out during the period: Beginning Inventory 1,000 1,000 1,000 +Started and Completed : 41,600 41,600 41,600 +Ending – 80% conversion 700 420 560 Normal spoilage 2,290 0 0 Abnormal spoilage 1,210 1,210 1,210 =Total units accounted for 46,800 44,230 44,370

2nd – Compute average cost per equivalent unit:

 Material Conversion Beginning \$13,181 \$    6,732 Added this period \$66,970 \$  29,040 Total \$ 80,151 \$ 35,772 / Equivalent Units above 44,230 44,370 = Cost per Equivalent Unit \$ 1.81 \$ 0.81

B. Normal Spoilage is \$0

Abnormal Spoilage is:

 Material:       1,210 x \$1.81 =    \$2,190 Conversion:  1,210 x \$0.81 =      \$ 980 Total value                                  \$ 3,170 Expensed this period

C. Value FG before recording journal entries

You do not need to value WIP because no journal entry is made for this amount.

Value FG:

 Beginning + S/C                x  total cost per unit 1,000 + 41,600 = 42,600  x  (\$1.81 + \$0.81) = \$111,612

Journal Entries:

Work in Process                     96,010
Raw Materials                        66,970
Salaries Payable, cash…       29,040

Finished Goods                    111,612
Work in Process                     111,612

Loss from abnormal spoilage       3,170
Work in Process                          3,170

Note: Make sure you do not do more work than you are asked to do. You will most likely not have time to do more work than is required on your test.

2. SitOnIt, Inc. produces plastic chairs and uses FIFO process costing. The accountant gathered the following information to use to determine the value of ending inventory at the end of the period.

 Beginning Inventory: 1,000 chairs Started this period: 49,000 chairs Material: \$ 4,564 Material: \$213,978 Labor: \$ 8,354 Labor: \$404,895 Overhead: \$18,379 Overhead: \$890,769

Transferred to Finished Goods: 48,000 chairs
Total spoiled units: 1,459
Expected spoilage: 1.5% of 50,000 units expected to be started during the period (management estimates normal spoilage at this company based on expected to start).
Beginning inventory is 45% complete as to conversion. Ending inventory is 20% complete as to conversion. Material is added 10% at the beginning, 30% when conversion is 40% complete and 60% when conversion is 70% complete. Labor is added 40% at the beginning of the process, and 60% at the end of the process. Overhead is considered to be incurred evenly during the process. Inspection occurs at the completion of the process.

A. Calculate equivalent units of production for materials and conversion:
B. Compute the value of work in process and finished goods.
C. Compute the value of abnormal spoilage
D. Make all required journal entries for the current month

A. Equivalent units schedule – FIFO

 Quantity Went in during the period: Beginning Inventory 1,000 +Started In to Production 49,000 =Total Units to be accounted for: 50,000
 Equivalent Units Quantity Material Labor Overhead Came out during the period: Beginning Inventory 1,000 600 600 550 +Started and Completed : 47,000 47,000 47,000 47,000 +Ending Inventory 541 54 216 108 Normal spoilage 750 750 750 750 Abnormal spoilage 709 709 709 709 =Total units accounted for 50,000 49,113 49,275 49,117

Normal Spoiled = 1.5% x 50,000 = 750
Total spoiled – normal spoiled = abnormal spoiled 1,459 – 750 = 709

Started and Completed = Transferred 48,000 – beginning inventory 1,000
Ending inventory is the amount it takes to get the total to be 50,000

B. Value WIP and FG

1st – Compute cost per unit using FIFO: use only the \$ added this period / equiv. units

 Material Labor Overhead Added this period \$213,978 \$404,895 \$890,769 Equivalent units 49,113 49,275 49,117 = Cost per Eq. Unit \$4.36 \$8.22 \$18.14

2nd – Value WIP:

 Material:            54 x \$4.36  =    \$ 235 Labor               216 x \$8.22  =  \$ 1,776 Overhead:      108 x \$18.14 =  \$ 1,959       Total value                           \$ 3,970 WIP value

3rd – Value FG – This is done in 4 parts:

Beginning Inventory \$ \$ 4,564 + 8,354 + 18,379 = \$31,297

Beginning Inventory done this period

 Material      600 x \$4.36 \$ 2,616 Labor          600 x \$8.22 \$ 4,932 Overhead   550 x \$18.14 \$ 9,977

Started/Completed this period
47,000 x \$30.72   =               \$1,443,840

Normal Spoilage:
750 x \$30.72   =                          \$23,040

Total Finished Goods           \$1,515,702

C. Abnormal Spoilage:
709 x \$30.72  =         \$21,780

D. All Journal Entries:

Work in Process                        1,509,642
Raw Materials                              213,978
Wages Payable                             404,895
Cash, accounts payable…           890,769

Finished Goods                       1,515,702
Work in Process                        1,515,702

Loss from abnormal spoilage      21,780
Work in Process                              21,780

3. Mouse, Inc. produces mouse pads and uses weighted average process costing. The company ended the prior month with 2,500 mouse pads in process. During the month, total units accounted for totaled 54,500. At the end of the current month, 2,800 mouse pads were still in process (40% complete as to material and 60% complete as to conversion). Cost information for the month follows:

 Material Conversion Beginning Inventory \$ 2,456 (20% complete) \$ 8,432 (45% complete) Added this period \$21,934 \$89,040

The company expects that 4% of total units in process during the period will be spoiled. Actual units spoiled this period were 7% of units started this period. Inspection normally occurs at 60% of conversion. A batch of 1,000 bad units was discovered when an inspection had to be done at 20%.

A. Calculate equivalent units of production for materials and conversion:
B. Compute the value of work in process and finished goods.
C. Compute the value of abnormal spoilage
D. Make all required journal entries for the current month

A. Prepare the equivalent units schedule:

Normal spoilage = 4% x units in process of 54,500 = 2,180
Abnormal spoilage = total spoilage 3,640 – normal spoilage 2,180 = 1,460

Equivalent units schedule

 Quantity Went in during the period: Beginning Inventory 2,500 +Started In to Production 52,000 =Total Units to be accounted for: 54,500
 Equivalent Units Quantity Material Conversion Came out during the period: Beginning Inventory 2,500 2,500 2,500 +Started and Completed : 45,560 45,560 45,560 +Ending – 80% conversion 2,800 1,120 1,680 Normal spoilage 2,180 1,308 1,308 Abnormal spoilage 1,460 476 476 =Total units accounted for 54,500 50,964 51,524

Normal spoilage = 60% x quantity – this is when inspection occurs
Abnormal spoilage = 1,000 x 20% = 200 + 460 other x 60% = 276 = 476

B – Compute average cost per equivalent unit so you can value WIP and FG:

 Material Conversion Beginning Inventory \$ 2,456 \$ 8,432 Added this period \$21,934 \$89,040 Total \$24,390 \$ 97,472 / Equivalent Units above 50,964 51,524 = Cost per Equivalent Unit \$0.48 \$1.89

Value WIP:

 Material:       1,120 x \$0.48 =    \$ 538 Conversion:  1,680 x \$1.89 = \$ 3,175 Total value                                \$ 3,713

Value FG:

 Beginning + S/C               x      total cost per unit 2,500 + 45,560 = 48,060 x (\$0.48 + \$1.89) = \$113,902 + Normal Spoilage: 1,308 x \$2.37 =                  \$ 3,100 Total Finished Goods                                       \$117,002

C. Abnormal Spoilage is:

426 x \$2.37 = \$1,128

D. Journal Entries:

Work in Process                 110,974
Raw Materials                      21,934
Salaries Payable, cash…     89,040

Finished Goods                 117,002
Work in Process                 117,002

Loss from abnormal spoilage      1,128
Work in Process                         1,128