Chapter 18: Q21RQ (page 1006)
Describe ways the production cost report can be used by management.
The production cost report used by the management in the following ways:
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
Smith Paper Co. produces the paper used by wallpaper manufacturers. Smith’s four-stage process includes mixing, cooking, rolling, and cutting. On March 1, the Mixing Department had 400 rolls in process. During March, the Mixing Department completed the mixing process for those 400 rolls and also started and completed the mixing process for an additional 4,100 rolls of paper. The department started but did not finish the mixing process for an additional 500 rolls, which were 20% complete with respect to both direct materials and conversion work at the end of March. Direct materials and conversion costs are incurred evenly throughout the mixing process. The Mixing Department compiled the following data for March:
Direct materials | Direct labor | Manufacturing overhead allocated | Total costs | |
Beginning inventory, Mar. 1 | \(475 | \)275 | \(300 | \)1,050 |
Costs added during March | 5,045 | 2,900 | 2,965 | 10,910 |
Total costs | \(5,520 | \)3,175 | \(3,265 | \)11,960 |
Requirements
1. Prepare a production cost report for the Mixing Department for March. The company uses the weighted-average method.
2. Journalize all transactions affecting the company’s mixing process during March. Assume labor costs are accrued and not yet paid.
Describe how the FIFO method is different from the weighted-average method.
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.
Refer to Short Exercise S18-5. 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, 155,000 liters were completed and transferred out of the Filtration Department into the Bottling Department. The 45,000 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.
Refer to your answers from Exercise E18-21.
Requirements
1. Prepare the journal entries to record the assignment of direct materials and direct labor and the allocation of manufacturing overhead to the Blending Department. Also, prepare the journal entry to record the costs of the gallons completed and transferred out to the Packaging Department. Assume labor costs are accrued and not yet paid.
2. Post the journal entries to the Work-in-Process Inventory—Blending T-account.
What is the ending balance?
3. What is the average cost per gallon transferred out of the Blending Department
into the Packaging Department? Why would the company managers want to
know this cost?
What do you think about this solution?
We value your feedback to improve our textbook solutions.
