ACTG 2011 Lecture 4: Chapter 4
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Weighted Average Process Costing: | |||||||
Minot Processing Company manufactures one product on acontinuous basis in two departments, Processing and Finishing. Allmaterials are added at the beginning of work on the product in theProcessing Department. During December 2009, the following eventsoccurred in the Processing Department: | |||||||
Units started | 16,000 units | ||||||
Units completed and transferred to Finishing Department | 15,000 units | ||||||
Costs assigned to processing:Raw materials (one unit of rawmaterials for each unit of product started) | $142,900.00 | ||||||
Manufacturing supplies used | 18,000 | ||||||
Direct labor costs incurred | 51,000 | ||||||
Supervisors' salaries | 12,000 | ||||||
Other production labor costs | 14,000 | ||||||
Depreciation on equipment | 6,000 | ||||||
Other production costs | 18,000 | ||||||
Additional information follows: | |||||||
Minot uses weighted average costing and applies manufacturingoverhead to Work-in-Process at the rate of 100 percent of directlabor cost. | |||||||
Ending inventory in the Processing Department consists of 3,000units that are one-third converted. | |||||||
Beginning inventory contained 2,000 units, one-half converted,with a cost of $34,500 ($24,500 for materials and $10,000 forconversion). | |||||||
(a) Prepare a cost of production report for theProcessing Department for December. | |||||||
Minot Processing Company: Processing Department Cost of Production Report For the Month Ending December 31, 2009 | |||||||
Summary of units in process: | |||||||
Beginning | |||||||
Units started | |||||||
In process | |||||||
Completed | |||||||
Ending | |||||||
Equivalent units in process: | Materials | Conversion | Total | ||||
Units completed | |||||||
Plus equivalent units in ending inventory | |||||||
Equivalent units in process | |||||||
Total cost to be accounted for and cost per equivalent unit in process: | |||||||
Beginning work-in-process | $ | $ | $ | ||||
Current costs | |||||||
Total cost in process | $ | $ | $ | ||||
Equivalent units in process | + | + | |||||
Cost per equivalent unit in process | $ | $ | $ | ||||
Accounting for total costs: | |||||||
Transferred out | $ | ||||||
Ending work-in-process: | |||||||
Materials | $ | ||||||
Conversion | |||||||
Total cost accounted for | $ | ||||||
(b) Prepare an analysis of all changes inWork-in-Process. | |||||||
Work-in-process: | |||||||
Beginning | $ | ||||||
Current manufacturing costs: | |||||||
Direct materials | $ | ||||||
Direct labor | |||||||
Applied overhead | |||||||
Total | $ | ||||||
Cost of goods manufactured | |||||||
Ending | $ | ||||||
Dover Chemical Company manufactures specialty chemicals by a series of three processes, all materials being introduced in the Distilling Department. From the Distilling Department, the materials pass through the Reaction and Filling departments, emerging as finished chemicals.
The balance in the account Work in ProcessâFilling was as follows on January 1:
Work in ProcessâFilling Department | ||
(4,200 units, 70% completed): | ||
Direct materials (4,200 x $16.2) | $68,040 | |
Conversion (4,200 x 70% x $10.6) | 31,164 | |
$99,204 |
The following costs were charged to Work in ProcessâFilling during January:
Direct materials transferred from Reaction | ||
Department: 54,200 units at $16 a unit | $867,200 | |
Direct labor | 295,310 | |
Factory overhead | 283,730 |
During January, 53,700 units of specialty chemicals were completed. Work in ProcessâFilling Department on January 31 was 4,700 units, 40% completed.
Required:
1. Prepare a cost of production report for the Filling Department for January. If an amount is zero, enter "0". If required, round your cost per equivalent unit answers to two decimal places.
Dover Chemical Company | |||
Cost of Production Report-Filling Department | |||
For the Month Ended January 31 | |||
Unit Information | |||
Units charged to production: | |||
Inventory in process, January 1 | |||
Received from Reaction Department | |||
Total units accounted for by the Filling Department | |||
Units to be assigned costs: | |||
Equivalent Units | |||
Whole Units | Direct Materials | Conversion | |
Inventory in process, January 1 | |||
Started and completed in January | |||
Transferred to finished goods in January | |||
Inventory in process, January 31 | |||
Total units to be assigned costs | |||
Cost Information | |||
Cost per equivalent unit: | |||
Direct Materials | Conversion | ||
Total costs for January in Filling Department | $ | $ | |
Total equivalent units | |||
Cost per equivalent unit | $ | $ | |
Costs assigned to production: | |||
Direct Materials | Conversion | Total | |
Inventory in process, January 1 | $ | ||
Costs incurred in January | |||
Total costs accounted for by the Filling Department | $ | ||
Costs allocated to completed and partially completed units: | |||
Inventory in process, January 1 balance | $ | ||
To complete inventory in process, January 1 | $ | ||
Cost of completed January 1 work in process | $ | ||
Started and completed in January | $ | ||
Transferred to finished goods in January | $ | ||
Inventory in process, January 31 | |||
Total costs assigned by the Filling Department | $ |
Feedback
1. Calculate equivalent units for materials and conversion costs. Calculate the cost per equivalent unit for materials and conversion costs. Calculate the costs assigned to the beginning inventory, the units started and completed, and the ending inventory.
2. Journalize the entries for (1) costs transferred from Reaction to Filling and (2) the cost transferred from Filling to Finished Goods.
(1) | Work in Process-Filling Department | ||
Work in Process-Reaction Department | |||
(2) | Finished Goods | ||
Work in Process-Filling Department |
Feedback
2. Remember that there are three types of inventory; materials, work in process, and finished goods. What costs are captured in the work in process account? Are these units 100% complete or are they being transferred to another department?
3. Determine the increase or decrease in the cost per equivalent unit from December to January for direct materials and conversion costs. If required, round your answers to two decimal places.
Increase or Decrease | Amount | |
Change in direct materials cost per equivalent unit | Decrease | $ |
Change in conversion cost per equivalent unit | Increase | $ |
4. Discuss the uses of the cost of production report and the results of part (3).
The cost of production report may be used as the basis for allocating product costs between Work in Process and Finished Goods . The report can also be used to control costs by holding each department head responsible for the units entering production and the costs incurred in the department. Any differences in unit product costs from one month to another, such as those in part (3), can be studied carefully and any significant differences investigated.