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:
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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?
Bishop Company uses the FIFO method in its process costing system. The Mixing Department started the month with 500 units in a process that was 20% complete, started in the production of 2,000 units, and transferred 2,100 units to the finished goods storage area. All materials are added at the beginning of the process, and conversion costs occur evenly. The units in process at the end of the month are 45% complete concerning conversion costs. The department incurred the following costs:
Beginning WIP | Added this month | Total | |
Direct materials | \(500 | \)2,000 | \(2,500 |
Conversion cost | 1,250 | 5,450 | 6,700 |
Total | \)1,750 | \(7,450 | \)9,200 |
14A. How many units are still in process at the end of the month?
15A. Compute the equivalent production units for the Mixing Department for the current month.
16A. Determine the cost per equivalent unit for the current period for direct materials and conversion costs.
17A. Determine the cost to be transferred to the next department.
Question: The Cutting Department has 6,500 units in process at the end of September that are 100% complete for direct materials and 85% complete for conversion costs. Calculate the equivalent units of production for direct materials and conversion costs.
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.
Question: The Jimenez Toy Company makes wooden toys. The company uses a process costing system. Arrange the company’s accounts in the order the production costs are most likely to flow, using 1 for the first account, 2 for the second, and so on.
Order | Account |
Work-in-process inventory – Packaging | |
Cost of goods sold | |
Work-in-process inventory – Cutting | |
Work-in-process inventory – Finishing | |
Finished goods inventory |
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