Chapter 18: Q16RQ (page 1006)
What is the purpose of the Costs Accounted For section of the production cost report?
The production cost report is essential for the management because it contains vital information about the goods produced and the processing department's costs incurred in manufacturing the products.
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What are transferred in costs? When do they occur?
PepsiCo, Inc. is a global food and beverage company that manufactures brands such as Frito-Lay, Gatorade, Pepsi-Cola, Quaker, and Tropicana. One of the products PepsiCo, Inc. manufactures is Mountain Dew. The first process in manufacturing Mountain Dew consists of clarifying the water to remove impurities such as organic materials and bacteria. The clarification process involves mixing the water with aluminum sulfate (an indirect material) to remove the impurities.
Assume PepsiCo uses the weightedaverage method of process costing.
Requirements
1. During the month of June, the Clarification Department incurred the following costs in processing 100,000 liters:
Wages of workers operating the clarification equipment | $20,000 |
Manufacturing overhead allocated to clarification | 24,000 |
Water | 160,000 |
PepsiCo had no beginning Work-In-Process Inventory in the Clarification Department in June. Compute the June conversion costs in the Clarification Department.
2. Assume that water is added at the beginning of the clarification process and conversion costs are added evenly throughout the process. The Clarification Department completed and transferred out 60,000 liters during June. The 40,000 liters remaining in Clarification’s ending Work-in-Process Inventory were 100% complete for direct materials and 60% complete for conversion costs. Compute the equivalent units of production for direct materials and conversion costs for the Clarification Department.
3. Compute the cost per equivalent unit for direct materials and conversion costs for the Clarification Department.
The comparative financial statements of Norfolk Cosmetic Supply for 2018, 2017, and
2016 include the data shown here:
2018 2017 2016
Balance sheet—partial
Current Assets:
Cash
Short-term investments
Accounts Receivable, Net
Merchandise Inventory
Prepaid Expenses
Total Current Assets
Total Current Liabilities
Income statement—partial
Net Sales (all on account)
\( 70,000
140,000
280,000
355,000
70,000
915,000
560,000
5,890,000
\) 60,000
170,000
240,000
330,000
35,000
835,000
630,000
5,130,000
$ 50,000
120,000
260,000
310,000
35,000
775,000
640,000
4,210,000
Requirements
1. Compute these ratios for 2018 and 2017:
a. Acid-test ratio (Round to two decimals.)
b. Accounts receivable turnover (Round to two decimals.)
c. Days’ sales in receivables (Round to the nearest whole day.)
2. Considering each ratio individually, which ratios improved from 2017 to 2018 and
which ratios deteriorated? Is the trend favorable or unfavorable for the company?
The Packaging Department started the month with 600 units in process, received 1,200 units from the Finishing Department, and transferred 1,500 units to Finished Goods. Direct materials are added at the beginning of the process and conversion costs are incurred evenly. The units still in process at the end of the month are 60% complete for conversion costs. Calculate the number of units still in process at the end of the month and the equivalent units of production. The company uses the weighted-average method.
Describe how the FIFO method is different from the weighted-average method.
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