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## Practice As You Learn

### Cost Accounting

#### Medium to Hard Practice Test

You must memorize the following formats. All problems will give you all the information. You need to know where to put it and how to do the calculations.

Equivalent Units Schedule (all quantity, no dollars)

 Quantity Went in during the period: Beginning Inventory # +Started In Production # =Total Units to be accounted for: (1) # Equivalent Units Quantity Material Conversion Came out during the period: Beginning Inventory # # # +Started and Completed # # # +Ending Inventory # # # =Total units accounted for (1) total for (1) above = (1) below # # #

Calculate cost per equivalent unit:

 (labor+ O/H) Costs: Materials Conversion Beginning Inventory \$ \$ Current Period \$ \$ Total Product Costs \$ \$

Calculate cost per equivalent unit:

```         Average Cost per Equivalent Unit =                Product costs \$
Equivalent units```

After you have memorized the things above, follow these steps in this order.

```         You are doing three things:
1 & 2) Calculate equivalent units for each product type you have info for
3 & 4) Compute cost per equivalent unit
5) Value work in process and finished goods at the end of the period```

1) Fill out the quantity column (1st column) in the equivalent units schedule
Beginning inventory and started will be given – total and also put the total below. Beginning inventory and total are the same numbers below as above, fill in the S/C and Ending WIP from info given Remember that completed/transferred means S/C + Beginning

Once you put in what you know, you may have to plug to get the other quantity numbers.

2) Using the information given in the problem, fill out the equivalent unit columns For W.A – beginning is always 100%, same number as total For FIFO – beginning is the total x the % done this period only Started/Completed is always 100%, same number as total For ending – take the total x the % complete so far this period Total equivalent units for each – material, labor, O/H; or conversion

3) Get the cost information given in the problem for each type of product cost
For W.A. – add the beginning \$ + Added this period \$ and get total \$ to use For FIFO – only use the \$ added this period (ignore B.I \$)

4) Calculate a cost per unit for each equivalent unit column: material, labor, O/H, Conv.
Costs \$ / Total Equivalent units in the column = \$ Cost per E.U

5) Use the cost per equivalent unit and value the WIP and FG
Value of inventory is always: cost per EU x EUs in the row on the schedule

Process Costing – Problem 1. Weighted Average

Gemini, Inc. makes noodles and uses process costing. The company began the month with 10,000 EU of noodles in process that were 40% complete as to material and 25% complete as to conversion. During the month, 232,000 EU of noodles were started. At the end of the month, 6,000 EU noodles were still in process (80% complete as to material and 70% complete as to conversion). Cost information for the month is as follows:

 Material Conversion Beginning Inventory \$11,800 \$16,750 Added this period \$247,000 \$352,000

A. Calculate equivalent units using weighted average
B. Calculate cost per equivalent unit for material and conversion using weighted average
C. Prepare a cost reconciliation report using weighted average

Follow the 5 steps given in learn as you practice:

1 & 2) Calculate equivalent units for each cost type you have info for

A.

 Quantity Went in during the period: Beginnin Inventory 10,000 +Started In Production 232,000 =Total Units to be accounted for: 242,000 Equivalent Units Quantity Material Conversion Came out during the period: Beginning Inventory 10,000 10,000 10,000 +Started and Completed 226,000 226,000 226,000 +Ending – 80% complete for material and 70% conversion 6,000 4,800 4,200 =Total units accounted for 242,000 240,800 240,200

Beginning Inventory is always considered 100% when using weighted average
Started/Completed is always at 100%

Ending is 6,000 total x the % complete-80% for material and 70% for conversion.

Equivalent units is the number of whole units that could have been completed given the amount of material that was put in and given the amount of conversion that was added.

3 & 4) Compute cost per equivalent unit

B.

 (labor + O/H) Costs: Materials Conversion Beginning Inventory \$11,800 \$16,750 +Current Period \$247,000 \$352,000 Total Costs \$258,800 \$368,750 / Equivalent Units above 240,800 240,200 = Cost per Eq. Unit \$1.075 \$1.535
```5)  Value work in process and finished goods at the end of the period
Also called preparing a cost reconciliation report
C.
Eq. units from the row x Cost per Eq. Unit above
Value WIP:
Material:                            4,800 x \$1.075 = \$   5,160
Conversion:                      4,200 x \$1.535 = \$   6,447
Total value                                                    \$11,607 WIP value```

Value FG:        Equivalent units are from the beginning and started/comp rows

```                           Material + Conversion E.U.      x  total cost per unit
10,000 + 226,000 = 236,000 x (\$1.075 + \$1.535) = \$615,960
FG value```
```                           When using W. Ave. – all the units in finished goods received
100% of the cost this period, so you can do them all at one time.```
`                                    Total finished units (Beg + S/C) x total cost per unit`
`                  Total Value of Inventory – WIP + FG = \$627,567`
`                  Total Costs – Beginning + Added this period = \$627,550 `
```                           This is your double check, they should be the same except for rounding
```

Process Costing – Problem 2. FIFO

Gemini, Inc. makes noodles and uses process costing. The company began the month with 10,000 EU of noodles in process that were 40% complete as to material and 25% complete as to conversion. During the month, 232,000 EU of noodles were started. At the end of the month, 6,000 EU noodles were still in process (80% complete as to material and 70% complete as to conversion). Cost information for the month is as follows:

 Material Conversion Beginning Inventory \$11,800 \$16,750 Added this period \$247,000 \$352,000

A. Calculate equivalent units using the FIFO method
B. Calculate cost per equivalent unit for material and conversion using the FIFO method
C. Prepare a cost reconciliation report using the FIFO method

Follow the 5 steps noted above:

1 & 2) Calculate equivalent units for each product type you have info for

 Quantity Went in during the period: Beginning Inventory 10,000 +Started In Production 232,000 =Total Units to be accounted for: 242,000 Equivalent Units Quantity Material Conversion Came out during the period: Beginning Inventory 10,000 6,000 7,500 +Started and Completed 226,000 226,000 226,000 +Ending – 80% complete for material and 70% conversion 6,000 4,800 4,200 =Total units accounted for 242,000 236,800 237,700

Beginning is the % that was done this period only (1 less the % done in the prior
period, only this period’s work). 1-40% = 60%

Started/Completed is always at 100%
Ending is 6,000 total x the % complete, 70% for material and 80% for conversion.

Equivalent units = the number of whole units that could have been completed
given the amount of material that was put in and the amount of conversion that was added.

3 & 4) Compute cost per equivalent unit

 (labor + O/H) Costs: Materials Conversion Beginning Inventory \$0 \$0 +Current Period \$247,000 \$352,000 Total Costs \$247,000 \$352,000 / Equivalent Units above 236,800 237,700 = Cost per Eq. Unit \$1.04 \$1.48

5) Value work in process and finished goods at the end of the period
Also called preparing a cost reconciliation report

```Value WIP:
Eq. units from WIP row x Cost per Eq. Unit above

Material:                         4,800 x \$1.04 = \$  4,992
Conversion:                   4,200 x \$1.48 = \$  6,216
Total value                                              \$11,208 WIP value```
```Value FG:
Beginning Inventory \$ (11,800+16,750)          \$28,550```
```                  Beginning Inventory done this period
Material 6,000 x \$1.04                                    \$  6,240
Conversion 7,500 x \$1.48                              \$11,100```
```                  Started/Completed this period
Material 226,000 x \$1.04                                \$235,040
Conversion 226,000 x \$1.48                          \$334,480
(or together 226,000 x \$2.52)
________```
`                  Total value of Finished Goods this period        \$615,410`
`         Total Value of Inventory – WIP + FG = \$626,618`
`         Total Costs – Beginning + Added this period = \$627,550 `
```                  This is your double check, they should be the same except for rounding
Difference of 632 is .1%, not significant
```