Study Guide Solutions -- Chapter 7
CHAPTER 6 SOLUTIONS
Part I Part II
1. T 6. T 11. T 1. i 6. m 10. c
2. T 7. F 12. F 2. a 7. b 11. d
3. T 8. T 13. T 3. j 8. k 12. l
4. F 9. F 14. T 4. e 9. g 13. f
5. F 10. F 15. T 5. h
Part III
1. (a) The equivalent unit computation would include only the marketable units transferred out plus the work done on the units still in process at the end of the period.
2. (d) The cost of normal shrinkage and scrap is a product cost that attaches to the inventory rather than a period cost that is expensed when it occurs.
3. (d) The computation for this normal loss is:
Units completed and transferred 90,000
Ending work in process with 60% materials 30,000
120,000
4. (c) Unit output—Materials:
Finished and transferred out 210,000
Ending work in process
(40,000 × 100%) 40,000
250,000 units equivalent production
Unit output—Conversion Costs:
Transferred out 210,000
Ending work in process
(40,000 × 20%) 8,000
218,000 units equivalent production
5. (a) Under the FIFO method, the degree of completion of the beginning work in process must be stated in order to compute completed unit costs; average costing does not require the degree of completion of the beginning work in process.
6. (c) Equivalent units of production under FIFO = percent of work required to complete beginning inventory + units started and completed during period + percent of work performed on ending inventory.
7. (b) Since the cost of the beginning inventory is kept separate from the cost of the goods started and completed during the period under FIFO but not under average costing, the cost of goods manufactured would be the same under both methods when there is no beginning inventory.
8. (a) All manufacturing costs (materials, labor, and overhead) should be allocable as joint costs.
9. (a) Joint costs should be allocated in a manner that assigns a proportionate amount of the total cost to each product by means of a quantitative basis such as the market or sales value method, the quantitative or physical unit method, the average unit cost method, or the weighted average method.
10. (b) Using the adjusted sales value method the assigned joint costs are:
Gasoline: [pic]
Kerosene: [pic]
Part IV
Tejas Manufacturing, Inc.
Cost of Production Summary—Assembly
For the Month of June 2008
Cost of work in process, beginning of month:
Cost in Machining $ 25,000
Cost in Assembly:
Materials –0–
Labor $2,720
Factory overhead 1,360 4,080 $ 29,080
Cost of goods received from Machining during month 225,000
Cost of production for month:
Materials $ 10,000
Labor 25,000
Factory overhead 12,500 47,500
Total costs to be accounted for $301,580
Unit output for month:
Materials:
Finished and transferred to Painting during month 38,000
Equivalent units of work in process, end of month –0–
Finished and on hand 2,000
Total equivalent production 40,000
Labor and factory overhead:
Finished and transferred to Painting during month 38,000
Equivalent units of work in process, end of month (10,000 units, one-half completed) 5,000
Finished and on hand 2,000
Total equivalent production 45,000
Unit cost for month:
Materials [($0 + $10,000) ÷ 40,000] $ .250
Labor [($2,720 + $25,000) ÷ 45,000] .616
Factory overhead [($1,360 + $12,500) ÷ 45,000} .308
Total $1.174
Inventory costs:
Cost of goods finished and transferred to Painting during month:
Cost in Machining (38,000 × $5.00*) $190,000
Cost in Assembly (38,000 × $1.174) 44,612 $234,612
Cost of work in process, end of month:
Finished and on hand:
Cost in Machining (2,000 × $5.00) $ 10,000
Cost in Assembly (2,000 × $1.174) 2,348 12,348
Still in process:
Cost in Machining (10,000 × $5.00) $ 50,000
Cost in Assembly:
Materials –0–
Labor (10,000 × 1/2 × $.616) $3,080
Factory overhead (10,000 × 1/2 × $.308) 1,540 4,620 54,620
Total production cost accounted for $301,580
*Total cost from preceding dept.:
Work in process—beginning inventory $ 25,000
Transferred in during period 225,000
Total $250,000
*Total units from preceding dept.:
Work in process—beginning inventory 5,000
Transferred in during period 45,000
Total 50,000
*$250,000 ÷ 50,000 = $5 per unit
Part V
Jedi Chemical Company
Cost of Production Summary—Refining Department
For the Month of May 2008
Cost of work in process, beginning of month $ 10,000
Cost of goods received from prior department during month 120,050
Cost of production for month:
Materials –0–
Labor $50,375
Factory overhead 40,300 90,675
Total costs to be accounted for $220,725***
Labor and
Factory Overhead
Unit output for month:
To complete beginning units in process (10,000 × 50%) 5,000*
Units started and finished during month 30,000*
Ending units in process (7,000 × 75%) 5,250*
Total equivalent production 40,250*
Unit cost for month:
Labor ($50,375 ÷ 40,250) $1.252*
Factory overhead ($40,300 ÷ 40,250) 1.001*
Total $2.253*
Inventory costs:
Cost of goods finished and transferred to Finishing Department during month:
Beginning units in process:
Prior month’s cost $10,000
Current cost to complete:
Labor (10,000 × 1/2 × $1.252) 6,260
Factory overhead (10,000 × 1/2 × $1.001) 5,005 $ 21,265***
Units started and finished during month:
Cost in prior department (30,000 × $3.245**) $97,350
Cost in Refining Department (30,000 × $2.253) 67,590
Total cost transferred 164,940***
Cost of work in process, end of month:
Cost in prior department (7,000 × $3.245) $22,715
Cost in Refining Department:
Labor (7,000 × 3/4 × $1.252) 6,573
Factory overhead (7,000 × 3/4 × $1.001) 5,255 34,543***
Total production costs accounted for $220,748***
* Transferred to the finishing department 40,000
Less units in beginning inventory 10,000
Units started and completed during month 30,000
** Cost transferred from prior department: $120,050 ÷ 37,000 = $3.245 adjusted unit cost
*** Rounding difference
Part VI
| 1. | | |Unit |Total |Percent |Assignment of |
| |Product |Units |Sales Price |Sales Value |of Total |Joint Costs |
| |Vertical |15,000 |$10 |$150,000 | 75% |$56,250 |
| |Leap |10,000 |$5 | 50,000 | 25% | 18,750 |
| | Total |25,000 | |$200,000 |100% |$75,000 |
| 2. | | |Unit |Ultimate |Cost |Sales Value |Percent |Assignment |
| | | |Sales |Sales |After |at |of |of |
| |Product |Units |Price |Value |Split-off |Split-off |Total |Joint Costs |
| |Vertical |15,000 |$10 |$150,000 |$45,000 |$105,000 |72.41% |$ 54,308 |
| |Leap |10,000 |$5 | 50,000 | 10,000 | 40,000 | 27.59% | 20,692 |
| | Total |25,000 | |$200,000 |$55,000 |$145,000 |100.00% |$ 75,000 |
| 3. |Total costs to split-off point | $75,000 |
| |Less market value of by-product | 10,000 |
| |Joint costs to be assigned to main products | $65,000 |
| |Product | | |
| |Vertical: $65,000 x 72.41%................ |= |$ 47,067 |
| |Leap: 65,000 × 27.59% |= | 17,933 |
| |Dunk |= | 10,000 |
| |Total joint costs assigned | |$ 75,000 |
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