Anderson Winery in Napa Valley, California, has two departments: Fermenting and packing. 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. Data from the month of March for the Fermenting Department are as follows: Beginning Work in Process Inventory -0- gallons Started production 8,000 gallons Completed and transferred out to Packing in March 6,550 gallons Ending Work in Process Inventory 1,450 gallons Costs: Beginning Work in Process Inventory $0 Costs added during March: Direct materials $104,000 Direct labour $ 24,000 Manufacturing overhead $ 45,390 Total costs added during March $173,390 The units still in process are 80% of the way through the fermenting process. Required: i) Compute the equivalent units for direct materials and for conversion costs ii) Compute the total cost of the units (gallons) a) Completed and transferred out to the Packing Department. b) In the Fermenting Department ending work in process inventory.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Anderson Winery in Napa Valley, California, has two departments: Fermenting and packing. 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.
Data from the month of March for the Fermenting Department are as follows:
Beginning Work in Process Inventory -0- gallons
Started production 8,000 gallons
Completed and transferred out to Packing in March 6,550 gallons
Ending Work in Process Inventory 1,450 gallons
Costs:
Beginning Work in Process Inventory $0
Costs added during March:
Direct materials $104,000
Direct labour $ 24,000
Manufacturing
Total costs added during March $173,390
The units still in process are 80% of the way through the fermenting process.
Required:
i) Compute the equivalent units for direct materials and for conversion costs
ii) Compute the total cost of the units (gallons)
a) Completed and transferred out to the Packing Department.
b) In the Fermenting Department ending work in process inventory.
iii)
iv) Present the journal entries to record the assignment of direct materials and direct labour and the allocation of manufacturing overhead to the Fermenting Department. Also, give the journal entry to record the cost of the gallons completed and transferred out to the Packaging Department
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