Chapter 16: Q11QS (page 745)
Refer to the information in QS 16-10. Calculate the assembly department’s cost per equivalent unit of production for materials and for conversion for November. Use the weighted-average method.
Cost per equivalent unit:
Material:$1 per unit
Conversion:$1.3 per unit
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List the four steps in accounting for production activity in a
reporting period (for process operations).
Question: Abraham Company uses process costing to account for its production costs. Conversion is added evenly throughout the process. Direct materials are added at the beginning of the process. During September, the production department transferred 80,000 units of product to finished goods. Beginning work in process consisted of 2,000 units that were 100% complete with respect to direct materials and 85% complete with respect to conversion. Of the units completed, 2,000 were from beginning work in process and 78,000 units were started and completed during the period. Beginning work in process had \(58,000 of direct materials and \)86,400 of conversion cost. At the end of September, the work-in-process inventory consists of 8,000 units that are 25% complete with respect to conversion. The direct materials cost added in September is \(712,000, and conversion cost added is \)1,980,000. The company uses the weighted average method.
Required
Analysis Component
Assume that a company produces a single product by processing it first through a single production department. Direct labor costs flow through what accounts in this company’s process cost system?
Fast Co. produces its product through a single processing department. Direct materials are added at the start of production, and conversion costs are added evenly throughout the process. The company uses monthly reporting periods for its weighted-average process costing system. The Work in Process Inventory account has a balance of \(84,300 as of October 1, which consists of \)17,100 of direct materials and \(67,200 of conversion costs.
During the month, the company incurred the following costs:
Direct material | \)144,400 |
Conversion | 862,400 |
During October, the company started 140,000 units and transferred 150,000 units to finished goods. At the end of the month, the work in process inventory consisted of 20,000 units that were 80% complete with respect to conversion costs.
Required
1. Prepare the company’s process cost summary for October using the weighted-average method.
2. Prepare the journal entry dated October 31 to transfer the cost of the completed units to finished goods inventory.
Major League Bat Company manufactures baseball bats. In addition to its work in process inventories, the company maintains inventories of raw materials and finished goods. It uses raw materials as direct materials in production and as indirect materials. Its factory payroll costs include direct labor for production and indirect labor. All materials are added at the beginning of the process, and conversion costs are applied uniformly throughout the production process.
Required
You are to maintain records and produce measures of inventories to reflect the July events of this company. Set up the following general ledger accounts and enter the June 30 balances: Raw Materials Inventory, \(25,000; Work in Process Inventory, \)8,135 (\(2,660 of direct materials and \)5,475 of conversion); Finished Goods Inventory, \(110,000; Sales, \)0; Cost of Goods Sold, \(0; Factory Wages Payable, \)0; and Factory Overhead, \(0.
Units | |
Beginning inventory | 5,000 units |
Started | 14,000 units |
Ending inventory | 8,000 units |
Beginning inventory | |
Materials—Percent complete | 100% |
Conversion—Percent complete | 75% |
Ending inventory | |
Materials—Percent complete | 100% |
Conversion—Percent complete | 40% |
3. Using the results from part 2 and the available information, make computations and prepare journal entries to record the following:
g. Total costs transferred to finished goods for July (label this entry g).
h. Sale of finished goods costing \(265,700 for \)625,000 in cash (label this entry h).
4. Post entries from parts 1 and 3 to the ledger accounts set up at the beginning of the problem.
5. Compute the amount of gross profit from the sales in July. (Note: Add any underapplied overhead to, or deduct any overapplied overhead from, the cost of goods sold. Ignore the corresponding journal entry.)
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