1) The Spangle Company uses the process cost system and ...



1) The Spangle Company uses the process cost system and average costing. The following prediction data are for the month of July: Production Costs Work in process, beginning of month Materials $2,500 Labor 1,200 Factory Overhead 1,100 $4800 Costs incurred during the month Materials $13,500 Labor 9,200 Factory overhead 8,500 31,200 $36,000 Production Report Units In process, beginning of m onth 500 Finished and transferred during the month 3,800 Work in process, end of month 400 Stage of completion 50% prepare a cost of production summary for the month?

|Production Cost Report – Average Cost Method | | |

|For the Month of | | | |

|Quantity Schedule | | | |

|Quantities | Physical Units | Equivalent Units |

| | | Material | Labor |

|Units to be accounted for | | | |

| Work in Process, Beginning | 500 | | |

|Started into Production | 3,700 | | |

| Total Units | 4,200 | | |

|Units Accounted for | | | |

| Transferred Out | 3,800 | 3,800 | 3,800 |

| WIP, Ending | 400 | 200 | 200 |

| Total Units | 4,200 | 4,000 | 4,000 |

|Cost per Equivalent Unit | | | |

|Unit Costs | Material | Labor | Overhead |

| WIP | 2,500 | 1,200 | 1,100 |

| Costs in Month | 13,500 | 9,200 | 8,500 |

| Total Cost | 16,000 | 10,400 | 9,600 |

| Equivalent Units | 4,000 | 4,000 | 4,000 |

| Unit Costs | 4.00 | 2.60 | 2.40 |

|Cost Reconciliation Schedule | | | |

|Costs to be accounted for | | | |

| WIP, Beginning | | 4,800 | |

| Started into Production | | 31,200 | |

| Total Costs | | 36,000 | |

|Costs Accounted for | | | |

| Transferred out | | 34,200 | |

| Work in process, Ending | | | |

| Material | 800 | | |

| Labor | 520 | | |

| Overhead | 480 | | |

|Total WIP | | 1,800 | |

| Total costs | | 36,000 | |

2) The Following data is for a production company: Beginning inventory 1,000 units, three-fourths completed Finished and transferred 16,000 units Work in process, end of month 2,000 units, one half completed Assume that materials, labor, and factory overhead are added evenly throughout the process. On a separate sheet of paper, complete the following problems. Label each answer carefully and show all your work. a. Using the average cost method, compute the equivalent production. b. Using the first-in, first-out method, compute the equivalent production. c. During the month, Department B received 10,000 units from department a with a unit cost of $10; 2,00 of these unit were lost during production in Department B. Determine the adjusted cost of these units. d. During the month, Department 2 received 8,000 from department 1 with a unit cost of $15. Department 2 added materials that increased the number of units by 50%. Determine the adjusted cost of these units.

a)

|Quantity Schedule | | | | |

|Quantities | Physical Units | Equivalent Units |

| | | Material | Labor | Overhead |

|Units to be accounted for | | | | |

| Work in Process, Beginning | 1,000 | | | |

|Started into Production | 17,000 | | | |

| Total Units | 18,000 | | | |

|Units Accounted for | | | | |

| Transferred Out | 16,000 | 16,000 | 16,000 | 16,000 |

| WIP, Ending | 2,000 | 1,000 | 1,000 | 1,000 |

| Total Units | 18,000 | 17,000 | 17,000 | 17,000 |

b)

|Quantity Schedule | | | | |

|Units to be Accounted for | | | | |

|Beginning Work in Process | 1,000 | | | |

|Started into Production | 17,000 | | | |

|Total Units in Production | 18,000 | | | |

|Units Accounted for | | | | |

| | |Material |Labor |Overhead |

|Transferred Out | | | | |

|From Beginning WIP | 1,000 | 250 | 250 | 250 |

|Started and Completed | 15,000 | 15,000 | 15,000 | 15,000 |

|Ending WIP | 2,000 | 1,000 | 1,000 | 1,000 |

|Equivalent Units | 18,000 | 16,250 | 16,250 | 16,250 |

c)

Total cost = 10,000 units X $10 = $100,000

Units available = 10,000-2,000=8,000

Adjusted cost = 100,000/8,000 = $12.5 per unit

d)

Cost received = 8,000X15 = $120,000

Units in Department 2 = 8,000 X1.5 = 12,000

Adjusted cost = 120,000/12,000=$10 per unit

3) A Plant uses process costing has 8,000 units in beginning work in process, 15,000 more started, and 5,000 units in the ending work in process. Using this information, answer the following questions on a separate sheet of paper. Label each answer carefully and show all of your work. a. How many units are there to account for? b. How many units are transferred using the average cost method? c. How many units are transferred using the first-in, first-out method? d. How many units were both started and completed during the period?

a)

Units to account for

Units in beginning inventory 8,000

Units started 15,000

Total units to account for 23,000

b)

Units transferred = units to account for – units in ending inventory

= 23,000-5,000 = 18,000 units

c)

Units transferred remain the same at 18,000 units

d)

Units transferred are 18,000

Units from beginning inventory = 8,000

Units started and completed = 18,000-8,000=10,000

4) Cost of production summary, three departments; change in unit cost from prior department; department cost work sheet; journal entries; manufacturing statement

Taguchi Manufacturing Co. uses the process cost system. The following information for the month of December was obtained from the company's book and from the production reports submitted by the department heads:

Production Report &nbs p; Mixing Blending Bottling

Units in process, beginning of period &nbs p; 2,500 1,500 3,000

Started in process during the month 12,500

Received from prior department &nb sp; 13,000 10,000

Finished and transferred &nb sp; 13,000 10,000 11,000

Finished and on hand 500

Units in process, end of period 2,000 4,000 2,000

Stage of completion &n bsp; ¼ 4/5 ½

Production Costs

Work in process, beginning of period:

Cost in Mixing .......................................... &n bsp; $3,075 $6150

Materials ............................................... $1470

Labor ....................................................... 650

Factory overhead ................................. 565

Cost in Blending .......................................... 3,660

Materials .......................................... &n bsp; 240

Labor .......................................... &nb sp; 905

Factory overhead ..................... & nbsp; 750

Cost in Bottling

Materials ................................. &nbs p; 900

Labor .......................................... &n bsp; 3,100

Factory overhead..................... &n bsp; 3,080

Cost incurred during the month:

Materials .......................................... 15,000 2,500 1,500

Labor .......................................... 4,750 &nb sp; 8,000 6,500

Factory overhead ..................... 5,240 & nbsp; 6,100 7,000

TOTAL ................................................. $27,675 $21,570 $31,890

Required:

1. Prepare Costs of production summaries for the mixing, blending, and Bottling departments.

2. Prepare a departmental cost work sheet.

3. Draft the journal entries required to record the month's operations.

4. Prepare a statement of cost of goods manufactured for December.

1.

Taguchi Manufacturing Co.

Cost of Production Summary—Mixing

For the Month Ended December 31, 20--

Cost of work in process, beginning of month:

Materials $ 1,470

Labor 650

Factory overhead 565 $ 2,685

Cost of production for month:

Materials $ 15,000

Labor 4,750

Factory overhead 5,240 24,990

Total costs to be accounted for $ 27,675

Unit output for month:

Finished and transferred to Blending during month 13,000

Equivalent units of work in process, end of month

(2,000 units, one-fourth completed) 500

Total equivalent production 13,500

Unit cost for month:

Materials ($1,470 + $15,000) ( 13,500 $ 1.22

Labor ($650 + $4,750) ( 13,500 .40

Factory overhead ($565 + $5,240) ( 13,500 .43

Total $ 2.05

Inventory costs:

Costs of goods finished and transferred to Blending

during month (13,000 × $2.05) $ 26,650

Cost of work in process, end of month:

Materials (2,000 × 1/4 × $1.22) $ 610

Labor (2,000 × 1/4 × $0.40) 200

Factory overhead (2,000 × 1/4 × $0.43) 215 1,025

Total production costs accounted for $ 27,675

Taguchi Manufacturing Co.

Cost of Production Summary—Blending

For the Month Ended December 31, 20--

Cost of work in process, beginning of month:

Cost in Mixing $ 3,075

Cost in Blending:

Materials $ 240

Labor 905

Factory overhead 750 1,895 $ 4,970

Cost of goods received from Mixing during month 26,650

Cost of production for month:

Materials $ 2,500

Labor 8,000

Factory overhead 6,100 16,600

Total costs to be accounted for $ 48,220

Unit output for month:

Finished and transferred to Bottling during month 10,000

Finished and on hand 500

Equivalent units of work in process, end of month

(4,000 units, four-fifths completed) 3,200

Total equivalent production 13,700

Unit cost for month:

Materials ($240 + $2,500) ( 13,700 $ 0.20

Labor ($905 + $8,000) ( 13,700 .65

Factory overhead ($750 + $6,100) ( 13,700 .50

Total $ 1.35

Inventory costs:

Costs of goods finished and transferred to Bottling

during month:

Cost in Mixing (10,000 × $2.05) $ 20,500

Cost in Blending (10,000 × 1.35) 13,500

(10,000 × $3.40) $ 34,000

Cost of goods finished and on hand:

Cost in Mixing (500 × $2.05) $ 1,025

Cost in Blending (500 × 1.35) 675

(500 × $3.40) 1,700

Cost of work in process, end of month:

Cost in Mixing (4,000 × $2.05) $ 8,200

Cost in Blending:

Materials (4,000 × 4/5 × $0.20) $ 640

Labor (4,000 × 4/5 × $0.65) 2,080

Factory overhead (4,000 × 4/5 × $0.50) 1,600 4,320 12,520

Total production costs accounted for $ 48,220

Taguchi Manufacturing Co.

Cost of Production Summary—Bottling

For the Month Ended December 31, 20--

Cost of work in process, beginning of month:

Cost in Mixing $ 6,150

Cost in Blending 3,660

$ 9,810

Cost in Bottling:

Materials $ 900

Labor 3,100

Factory overhead 3,080 7,080 $ 16,890

Cost of goods received from Blending 34,000

Cost of production for month:

Materials $ 1,500

Labor 6,500

Factory overhead 7,000 15,000

Total costs to be accounted for $ 65,890

Unit output for month:

Finished and transferred to finished goods 11,000

Equivalent units of work in process, end of month

(2,000 units, one-half completed) 1,000

Total equivalent production 12,000

Unit cost for month:

Cost from preceding department:*

Beginning inventory (3,000) $ 9,810

Goods received during month (10,000) 34,000

Average unit cost for goods (13,000) $ 43,810 $ 3.37

Cost in Bottling:

Materials ($900 + $1,500) ( 12,000 $ 0.20

Labor ($3,100 + $6,500) ( 12,000 .80

Factory overhead ($3,080 + $7,000) (12,000 .84

Total $ 1.84

Inventory costs:

Costs of goods finished and transferred:

Cost in Mixing and Blending (11,000 × $3.37) $ 37,070

Cost in Bottling (11,000 × 1.84) 20,240

(11,000 × $5.21) $ 57,310

Cost in work in process, end of month:

Cost in Mixing and Blending (2,000 × $3.37) $ 6,740

Cost in Bottling:

Materials (2,000 × 1/2 × $0.20) $ 200

Labor (2,000 × 1/2 × $0.80) 800

Factory overhead (2,000 × 1/2 × $0.84) 840 1,840 8,580

Total production costs accounted for $ 65,890

*Alternative calculation.

Detailed calculation of the average unit costs from other departments as follows:

Cost from

Units Mixing Blending

Units in process, beginning of month 3,000 $ 6,150 $ 3,660

Units received during month 10,000 20,500 13,500

Total 13,000 $ 26,650 $ 17,160

Unit cost $ 2.05 $ 1.32

2.

Taguchi Manufacturing Co.

Departmental Cost Work Sheet

For the Month Ended December 31, 20--

| |Cost |Units Received in |Units Transf. or on|Amount Charged to |Amount Credited to |

| |per Unit Transf. |Dept. |Hand |Dept. |Dept. |

|Analysis | | | | | |

|Mixing: | | | | | |

| Opening inventory in | | 2,500 | |$ 2,685 | |

|process | | | | | |

| Started in process | | 12,500 | | | |

| Costs for month: | | | | | |

| Materials | $1.22 | | | 15,000 | |

| Labor | .40 | | | 4,750 | |

| Factory Overhead | .43 | | | 5,240 | |

| Finished and trans- | | | | | |

| ferred to Blending | $2.05 | | 13,000 | |$ 26,650 |

| Closing work in | | | | | |

| process | | | 2,000 | | 1,025 |

| Total | | 15,000 | 15,000 |$ 27,675 |$ 27,675 |

| | | | | | |

| | | | | | |

|Blending: | | | | | |

| Opening inventory in | | | | | |

| process | | 1,500 | |$ 4,970 | |

| Received during | | | | | |

| month from Mixing… | | 13,000 | | 26,650 | |

| Costs added during | | | | | |

| month: | | | | | |

| Materials | 0.20 | | | 2,500 | |

| Labor | 0.65 | | | 8,000 | |

| Factory overhead | 0.50 | | | 6,100 | |

| Finished and trans- | | | | | |

| ferred to Bottling | $3.40 | | 10,000 | |$ 34,000 |

| Completed and on | | | | | |

| hand | | | 500 | | 1,700 |

| Closing work in | | | | | |

| process | | | 4,000 | | 12,520 |

| Total | | 14,500 | 14,500 |$ 48,220 |$ 48,220 |

  

| |Cost |Units Received in |Units Transf. or on|Amount Charged to |Amount Credited to |

| |per Unit Transf.|Dept. |Hand |Dept. |Dept. |

|Analysis | | | | | |

| | | | | | |

|Bottling: | | | | | |

| Opening inventory in | | | | | |

| process | | 3,000 | |$ 16,890 | |

| Received during | | | | | |

| month from Blending | | 10,000 | | 34,000 | |

| Costs added during | | | | | |

| month: | | | | | |

| Materials | 0.20 | | | 1,500 | |

| Labor | 0.80 | | | 6,500 | |

| Factory overhead | 0.84 | | | 7,000 | |

| Finished and trans- | | | | | |

| ferred to stock |$ 5.24 | | 11,000 | |$ 57,310 |

| Closing work in | | | | | |

| process | | | 2,000 | | 8,580 |

| Adjusting due to | | | | | |

| averaging costs | | | | | |

| from prior | | | | | |

| department | (.03) | | | | |

| Total |$ 5.21 | 13,000 | 13,000 |$ 65,890 |$ 65,890 |

  Summary:

Materials:

Mixing $ 15,000

Blending 2,500

Bottling 1,500 $ 19,000

Labor:

Mixing $ 4,750

Blending 8,000

Bottling 6,500 19,250

Factory overhead:

Mixing $ 5,240

Blending 6,100

Bottling 7,000 18,340

Total production costs for December $ 56,590

Add work in process, beginning of month:

Mixing $ 2,685

Blending 4,970

Bottling 16,890 24,545

Total $ 81,135

Deduct work in process, end of month:

Mixing $ 1,025

Blending 14,220

Bottling 8,580 23,825

Cost of production, goods fully manufactured during

December $ 57,310

3. Work in Process—Mixing 15,000

Work in Process—Blending 2,500

Work in Process—Bottling 1,500

Materials 19,000

Work in Process—Mixing 4,750

Work in Process—Blending 8,000

Work in Process—Bottling 6,500

Payroll 19,250

Work in Process—Mixing 5,240

Work in Process—Blending 6,100

Work in Process—Bottling 7,000

Factory Overhead 18,340

Work in Process—Blending 26,650

Work in Process—Mixing 26,650

Work in Process—Bottling 34,000

Work in Process—Blending 34,000

Finished Goods 57,310

Work in Process—Bottling 57,310

4.

Taguchi Manufacturing Co.

Statement of Cost of Goods Manufactured

For the Month Ended December 31, 20--

Materials $ 19,000

Labor 19,250

Factory overhead 18,340

Total $ 56,590

Add work in process inventories, December 1 24,545

Total $ 81,135

Less work in process inventories, December 31 23,825

Cost of goods manufactured during the month $ 57,310

5) Average and FIFO cost methods; losses at the beginning and end of processing Similar to Self-Study problem 1

Mt. Orab Manufacturing Company uses a process cost system. Its manufacturing operation is carried on in two departments: Machining and finishing. The Machining Department uses the average cost method and the finishing department uses the FIFO cost method. Materials are added in both departments at the beginning of operations, but the added materials do not increase the number of units being processed. Units are lost in the Machining Department throughout the production process, and inspection occurs at the end of the process. The lost units have no scrap value and are considered to be a normal loss. Production statistics for July Show the following data:

& nbsp; Machining Finishing

Units In process,July 1 (all Material,

40% of labor and overhead).................................. 20,000

Units in Process, July 1 (all material,

80% of labor and overhead)................................... 40,000

Units started in production ................................... 140,000

Units Completed and transferred ............................. 100,000

Units transferred from machining........................... 100,000

Units completed and transferred to

Finished goods ....................................................... & nbsp; 100,000

Units in process, July 31(all material,

60% of labor and overhead) .................................. 40,000

Units in process, July 31 (all material,

40% of labor and overhead).................................... ; 40,000

Units lost in production ............................................... 20,000

Production Cost Machining Finishing

Work in process, July 1:

Materials ................................................................ &nb sp; $40,000 $110,000

Labor ....................................... ................................ 24,000 60,000

Factory Overhead.................................................. 8,000 40,000

Costs in Machining Department......................... &n bsp; 240,000

Costs incurred during month:

Materials ................................................................ $280,000 240,000

Labor ....................................................................... &n bsp; 180,000 160,000

Factory Overhead.................................................. 60,000 80,000

Required:

Prepare a cost of production summary for each department. (Round to three decimal places.)

Mt. Orab Manufacturing Company

Cost of Production Summary—Finishing Department

For the Month Ended July 31, 20--

Cost of work in process, beginning of month:

Cost in Machining Department $240,000

Cost in Finishing Department:

Materials $ 110,000

Labor 60,000

Factory overhead 40,000 210,000 $ 450,000

Cost of goods received from Machining during month 447,900

Cost of production for month:

Materials $ 240,000

Labor 160,000

Factory overhead 80,000 480,000

Total costs to be accounted for $ 1,377,900*

Unit output for month:

Materials:

To complete beginning units in process –0–

Units started and fully manufactured

during month (100,000 - 40,000) 60,000

Ending units in process (40,000, all material) 40,000

Total equivalent production 100,000

Labor and factory overhead:

To complete beginning units in process

(40,000, 20% to complete) 8,000

Units started and fully manufactured during month 60,000

Ending units in process (40,000, 40% completed) 16,000

Total equivalent production 84,000

Unit cost for month:

Materials ($240,000 ( 100,000) $ 2.400

Labor ($160,000 ( 84,000) 1.905

Factory overhead ($80,000 ( 84,000) 0.952

Total $ 5.257

Inventory costs:

Cost of goods finished and transferred to finished goods during month:

Beginning units in process:

Prior month's cost $ 450,000

Current cost to complete:

Labor (40,000 × 20% × $1.905) 15,240

Overhead (40,000 × 20% × $0.952) 7,616 $ 472,856

Units started and finished during month:

Cost in prior dept. (60,000 × $4.479) $ 268,740

Cost in Finishing Dept. (60,000 × $5.257) 315,420

Total cost transferred (60,000 × $9.736) 584,160

Cost of work in process, end of month:

Cost in prior dept. (40,000 units × $4.479) $ 179,160

Materials (40,000 units × $2.400) 96,000

Labor (40,000 units × 40% × $1.905) 30,480

Factory overhead (40,000 units × 40% × $0.952) 15,232 320,872

Total production costs accounted for $1,377,888*

*Rounding Difference

6) MINI-CASE

Allocation of Joint costs

Lark Manufacturing Company buys crypton for $0.80 a gallon. At the end of processing in Department 1, Crypton splits off into products A.B and C. Product A is sold at the split-off point with no further processing. Products B and C require Further processing before they can be sold. Product B is processed in Department 2, and Product C is processed in Department 3. Following is a summary of costs and other related data for the year ended December 31:

&n bsp; & nbsp; Dept. 1 Dept. 2 Dept. 3

Cost of crypton ........................................... $ 76,000

Direct Labor................................................. 14,000 $51,000 $ 65,000

Factory Overhead....................................... 10,000 &nbs p; 26,500 49,000

Total.............................................................. $100,000 $77,500 $114,000

& nbsp; Product A Product B Product C

Gallons sold ...................................... 2 0,000 30,000 45,000

Gallons on hand at December 31 ....... 10,000 15,000

Sales in Dollars ................................... $30,000 $96,000 $141,750

No inventories were on hand at the beginning of the year, and no crypton was on hand at the end of the year. All gallons on hand at the end of the year were complete as to processing. Clark uses the relative sales value method of allocating joint costs.

Required:

1. Calculate the allocation of joint costs.

2. Calculate the total cost per unit for each product.

3. In examinaning, the product cost reports, Lois Lane, Vice-President-Marketing, notes that the per unit cost of Product B is greater than the selling price of $3.20 that can be received in the competitive marketplace. Lane wonders if they should stop selling Product B. How did Lane determine that the product was being sold at a loss? What per unit cost should be used in determining if product B should Be sold?

1.

| | |Unit |Ultimate |Less Cost |Sales |Percent |Allocation |

| |Units |Selling |Sales |After |Value at |of Sales |Of Joint |

|Product |Produced(a) |Price(b) |Value |Split-Off |Split-Off |Value |Costs |

| | | | | | | | |

|A |30,000 |$1.50* | $ 45,000 | –0– | $ 45,000 | 32.5% | $ 32,500 |

|B |30,000 |3.20** | 96,000 | $ 77,500 | 18,500 | 13.4 | 13,400 |

|C |60,000 |3.15*** | 189,000 | 114,000 | 75,000 | 54.1 | 54,100 |

|Total | | | $ 330,000 | $ 191,500 | $ 138,500 | 100.0% |$ 100,000 |

* $30,000/20,000 gals.

** $96,000/30,000 gals.

***$141,750/45,000 gals.

| | | A | B | C |

| |Beginning inventory | –0– | –0– | –0– |

| |Sold during year |20,000 |30,000 |45,000 |

| |On-hand, end-of-year |10,000 |–0– |15,000 |

| |Produced during year |30,000 |30,000 |60,000 |

| | | | | |

2. Unit cost of Product A = $32,500 / 30,000 gals. = $1.08 gal.

Unit Cost of Product B =$51,000 Direct labor + $26,500 Factory overhead + $13,400 Joint costs = $90,900 / 30,000 gals. = $3.03 / gal.

Unit cost of Product C = $65,000 Direct labor + 49,000 Factory overhead + 54,100 Joint costs = $168,100 / 60,000 gals. = $2.80 / gal.

3. The joint cost of $13,400 that is allocated to Product B should be ignored in deciding whether or not it should be sold. The joint cost is a past cost that had to be incurred just to get all three products to split-off. It will still be $100,000, even if Product B is not marketed. The comparison should be made between the selling price per unit of $3.20 and the separable costs incurred after split-off of $2.58 ($77,500/30,000 gals.). Therefore, Product B provides incremental income of $.62 per unit and it should be processed beyond split-off and then sold.

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download