Mid Term Exam

Cost Accounting
Monday 27 Oktober 2008
Team Teaching

Problem I - Process Costing with Spoilage - 30%

Johansson Company specializes in producing several unique products. One of the is

called “WHTUX”. The “WHTUX” are mass produced in several batches, therefore the
company is using process costing to calculate the cost per equivalent unit for this product.
There are two departments involved in producing the “WHTUX” Our main concern is the
first department. There are two kind of materials which are used in the first department.
The first material (material ASOY) all are added at the beginning of the process, while
the second material (material GEBOY) all are added when the production reach 60%
stages. The inspection will be done also at the 60% stage, right before material GEBOY
are added. Products which are spoiled are not going to be processed further. Information
regarding the production process during the month of February 2008 for the first
department were as follows:

Beginning Inventory (70% complete) 5.000 units

Units started this period 67.000 units
Ending WIP Inventory (50% complete) 7.000 units
Normal Spoilage 5% of the product inspected (the rest re
categorized as abnormal loss)
Actual Spoilage Fund 6.000 units

Cost of Beginning Inventory Rp 7.150.000

Direct Material ASOY Rp 2.305.000
Direct Material GEBOY Rp 7.542.500
Conversion Costs

Cost Added This Period

Direct Material ASOY Rp 95.828.000
Direct Material GEBOY Rp 24.945.330
Conversion Costs Rp 135.093.368

Based on the information above (1) prepare cost of production report for department I
during the month of February 2008 (using weighted average method), and also (2) record
the necessary journal for transactions happened during February2008 for Department I

Problem II - Preparing COGM and Income Statement for Manufacturing Company - 20%

PT Manufaktur Raya is a manufacturing company specialized in producing engine

mounting for car manufacturers. Beginning balances at 1 January 2008 for selected
accounts are as follows:
 Accounts Receivable $ 250,000
Direct Material Inventory 150,000
Work-in-process Inventory 50,000
Finished Goods Inventory 200,000
Accounts Payable 200,000

Trial balance at 31 December 2008 consists of the following accounts and their related
balances:

Plant Utiities $ 25,000

Depreciation-office equipment $ 125,000
Accounts receivable $ 150,000
Indirect Manufacturing Labor $ 100,000
Depreciation-plant and equipment $ 45,000
Revenues $ 1,750,000
Miscellaneous manufacturing overhead $ 50,000
Marketing distribution cost period $ 150,000
Work-in-process inventory $ 10,000
General office expense period $ 125,000
Direct Material purchased $ 400,000
Plant supplies used $ 30,000
Property taxes on plant period $ 5,000
Direct material inventory $ 25,000
Salesperson’s company vehicle cost period $ 50,000
Finished Goods Inventory $ 60,000
Accounts Payable $ 100,000
Direct manufacturing labor $ 200,000

PT Manufaktur Raya uses three part classifications of direct materials, direct

manufacturing labor. and manufacturing overhead cost in its costing system.

Required:
1. Calculate:
a. Total prime cost and total conversion cost
b. Total inventoriable cost and period cost
2. Prepare an income statement and a supporting schedule of cost of goods manufactured

Problem III - Spoilage, Rework, and Scrap for Job Order Costing -25%

A. Spoilage at job costing

PT Bumi Perkasa is a machine manufacutrer company. Mr Arifin, the plant manager of

PT Bumi Perkasa, obtains the following information for job #5 in September 2008. A
total of 48 units were started, and 8 spoiled unis were detected and rejected at final
inspection, yielding 40 good units. spoiled units were considered to be normal spoilage.
Costs assigned prior to the inspection point are $2,000 per unit. The current disposal price
of the spoiled units is$300 per unit. When the spoilage is detected , the spoiled goods are
inventoried at $300 per unit.

Required

1. What is the spoilage rate?

2. Prepare the journal entries to record the normal spoilage, assuming:
a. the spoilage is related to a specific job
b. the spoilage is common to all jobs
c. the spoilage is considered to be abnormal spoilage

B. Rework at job costing

Assume that the 8 spoiled units above can be reworked for a total cost $6000. A total cost
of $16,000 associated with these units has already been assigned to Job#5 before the
rework.

Required:

Prepare the journal entries for the rework, assuming:

a. the rework is related to a specific job
b. the rework is common to all jobs
c. the rework is considered to be abnormal

C. Scrap

Assume that Job#5 above generates normal scrap with a total sales value of $400 (it is
assumed that the scrap returned to the storeroom is sold quickly).

Required:

Prepare the journal entries for:

a. recognizing immaterial scrap at time of sale
b. recognizing material scrap related to a specific job at time of sale

Problem IV – Process Costing Using FIFO Method – 25 %

Sunshine Delight Company produced a series of body care specially made for tanning
effect on skin. Process production consist of 2 production stage, processing and finishing.
There are two kinds of materials which will be added in the finishing Department. The
first direct material (DM A) will be added at the beginning of the period. While the
second material (DM B) will be added when the production reach 60% stage of
production. Conversion costs are added evenly during production process. On its process
costing calculation, the company used FIFO method. Below are production data for
October 2008 from finishing department:
Units of beginning inventory 20.000
Percentage completion of beginning units 30%
Cost of direct materials in beginning work in process 0
Units transferred from Procesing dept. 70.000
Units completed 60.000
Units in ending inventory 30.000
Percentage of completion of ending units 70%

Cost added during current period:

Direct materials A (DM A) $246.400
Direct materials B (DM B) $140.400
Conversion cost $409.500
Transferred in cost $1.078.000

Work in process, beginning:

Direct materials A (DM A) $70.400
Direct materials B (DM B) $0
Conversion cost $32.766
Transferred in cost $308.000

Cost of units transferred in during current period $644.000

Required:
Prepare a production cost worksheet using weighted average for the Finishing
Department anda calculate:
a. Physical unit
b. Equivalent unit
c. Cost per unit
d. Cost of unit Completed and Transferred Out
e. Cost of Ending WIP