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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Hotwax completed products costing $275,000 and transferred them to finished goods. Prepare its journal entry to record the transfer of units from production to finished goods inventory.
Question: During May, the production department of a process manufacturing system completed a number of units of a product and transferred them to finished goods. Of these transferred units, 62,500 were in process in the production department at the beginning of May and 175,000 were started and completed in May. May’s beginning inventory units were 40% complete with respect to materials and 80% complete with respect to conversion. At the end of May, 76,250 additional units were in process in the production department and were 80% complete with respect to materials and 20% complete with respect to conversion. The production department had \(683,750 of direct materials and \)446,050 of conversion cost charged to it during May. Its beginning inventory included \(99,075 of direct materials cost and \)53,493 of conversion cost.
Sierra Company manufactures woven blankets and accounts for product costs using process costing. The company uses a single processing department. The following information is available regarding its May inventories.
Beginning inventory | Ending inventory | |
Raw material inventory | \(60,000 | \)92,500 |
Work-in-process inventory | 435,000 | 515,000 |
Finished goods inventory | 633,000 | 605,000 |
The following additional information describes the company’s production activities for May.
Raw material (purchased on credit) | \(250,000 |
Factory payroll cost (paid in cash) | 1,530,000 |
Other overhead cost (other account credited) | 87,000 |
Material used: | |
Direct | \)157,500 |
Indirect | 60,000 |
Labor used: | |
Direct | \(780,000 |
Indirect | 750,000 |
Overhead rate as percentage of direct labor | 115% |
Sales on credit | \)2,500,000 |
Required
Can services be delivered by means of process operations?
Support your answer with an example.
Dengo Co. makes a trail mix in two departments: roasting and blending. Direct materials are added at the beginning of each process, and conversion costs are added evenly throughout each process. The company uses the FIFO method of process costing. During October, the roasting department completed and transferred 22,200 units to the blending department. Of the units completed, 3,000 were from beginning inventory and the remaining 19,200 were started and completed during the month. Beginning work in process was 100% complete with respect to direct materials and 40% complete with respect to conversion. The company has 2,400 units (100% complete with respect to direct materials and 80% complete with respect to conversion) in process at month-end. Information on the roasting department’s costs of beginning work in process inventory and costs added during the month follows
Cost | Direct Materials | Conversion |
Of beginning work in process inventory | \( 9,900 | \) 110,970 |
Added during the month | 248,400 | 1,082,970 |
Required
Analysis Component
3. The company provides incentives to department managers by paying monthly bonuses based on their success in controlling costs per equivalent unit of production. Assume that a production department underestimates the percentage of completion for units in ending inventory with the result that its equivalent units of production for October are understated. What impact does this error have on the October bonuses paid to that department’s managers? What impact, if any, does this error have on November bonuses?
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