Chapter 18: Q17RQ (page 1006)
What are transferred in costs? When do they occur?
The transferred in cost means the total cost of the product of one department, which is transferred to another department for further processing. It occurs when the manufacturing of a product passes through more than one process.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
Ocean Worthy uses three processes to manufacture lifts for personal watercraft: forming a lift’s parts from galvanized steel, assembling the lift, and testing the completed lift. The lifts are transferred to Finished Goods Inventory before shipment to marinas across the country.
Ocean Worthy’s Testing Department requires no direct materials. Conversion costs are incurred evenly throughout the testing process. Other information follows for the month of August:
UNITS | |
Beginning work-in-process inventory | 2,000 units |
Transferred in from assembling department during the period | 7,000 units |
Completed during the period | 4,000 units |
Ending work in process inventory (40% complete for conversion work) | 5,000 units |
COSTS | |
Beginning work in process inventory (transferred in costs, \(93,400, conversion costs, \)18,100) | $111,500 |
Transferred in from the assembly department during the period | 672,000 |
Conversion cost added during the period | 54,000 |
The cost transferred into Finished Goods Inventory is the cost of the lifts transferred out of the Testing Department. Ocean Worthy uses weighted-average
process costing.
Requirements
1. Prepare a production cost report for the Testing Department.
2. What is the cost per unit for lifts completed and transferred out to Finished Goods Inventory? Why would management be interested in this cost?
Shea Winery in Pleasant Valley, New York, has two departments: Fermenting and Packaging. Direct materials are added at the beginning of the fermenting process (grapes) and at the end of the packaging process (bottles). Conversion costs are added evenly throughout each process. The company uses the weighted-average method. Data from the month of March for the Fermenting Department are as follows:
Gallons | |
Beginning work-in-process inventory | 500 gallons |
Started in production | 8,600 gallon |
Completed and transferred out to packaging in march | 7,900 gallon |
Ending work-in-process inventory (80% of the way through the blending process) | 1,200 gallon |
Costs | |
Beginning work-in-process inventory | |
| \(540 |
| 195 |
| 210 |
Cost added during march | |
| 9,288 |
| 3,305 |
| 3,378 |
Total cost added during march | \)15,971 |
Requirements
1. Compute the Fermenting Department’s equivalent units of production for direct
materials and for conversion costs.
2. Compute the total costs of the units (gallons)
a. completed and transferred out to the Packaging Department.
b. in the Fermenting Department ending Work-in-Process Inventory.
Question: Refer to the data in Short Exercise S18-8 and your results for equivalent units of production. The Mixing Department of Complete Foods has direct materials costs of \(46,500 and conversion costs of \)23,540 for October.
Compute the cost per equivalent unit of production for direct materials and for
conversion costs.
Refer to Short Exercise S18A-15. At Spring Fresh, water is added at the beginning of the filtration process. Conversion costs are added evenly throughout the process. Now assume that in February, 130,000 liters were completed and transferred out of the Filtration Department into the Bottling Department. The 70,000 liters remaining in Filtration’s ending Work-in-Process Inventory were 80% of the way through the filtration process. Recall that Spring Fresh has no beginning inventories.
Compute the equivalent units of production for direct materials and conversion
costs for the Filtration Department using the FIFO method.
Mayhem Electronics makes game consoles in three processes: assembly, programming, and packaging. Direct materials are added at the beginning of the assembly process. Conversion costs are incurred evenly throughout the process. The Assembly Department had no Work-in-Process Inventory on March 31. In mid-April, Mayhem Electronics started production on 99,000 game consoles. Of this number, 95,000 game consoles were assembled during April and transferred out to the Programming Department. The April 30 Work-in-Process Inventory in the Assembly Department was 45% of the way through the assembly process. Direct materials costing \(301,950 were placed in production in Assembly during April, direct labor of \)100,960 was assigned, and manufacturing overhead of $136,200 was allocated to that department.
Requirements
1. Prepare a production cost report for the Assembly Department for April. The
company uses the weighted-average method.
2. Prepare a T-account for Work-in-Process Inventory—Assembly to show its activity during April, including the April 30 balance.
What do you think about this solution?
We value your feedback to improve our textbook solutions.
