Exercise 2: Preparation of quantity schedule in process costing

Alfred,  a US based company, produces chemical K-5 which has many industrial uses. The chemical K-5 is processed through four different departments. The production starts in the mixing department which is the first processing department of the company. The selected data from mixing department for the month of April is given below:

Required:

1. Compute the quantity of chemical K-5 finished and transferred to the next department during April.
2. Prepare a quantity schedule for the mixing department assuming the Alfred uses a weighted average method of process costing.
3. Prepare a quantity schedule for the mixing department assuming the Alfred uses a FIFO method of process costing.

Solution

1. Quantity finished and transferred to next department:

2. Quantity schedule – weighted average method:

3. Quantity schedule – FIFO method:

Under FIFO method we must divide the units transferred out figure into two parts – units completed and transferred out from beginning inventory and units completed and transferred out from production started during current period.

*Kilograms started and completed during April:
= Kilograms completed and transferred out during April – Kilograms in beginning inventory
= 165000 – 40,000
= 125,000