Aquatic Pleasures Corporation manufactures water skis by way of three consecutive processes: Moulding, Spraying & Packing. In the Moulding Department, fibre glass is heated and shaped into the form of a ski. In the Spraying Department the skis are sprayed into various colours and then sent to the Packing department where the skis are placed into cartons and sent to the Finished Goods warehouse. The following data relates to the Spraying Department for the month of October. During October, 2,000 skis valued at $324.25 each were transferred from the Moulding Department to the Spraying Department. Other costs incurred during the month were: Direct Materials Added Direct Labour Manufacturing Overhead $204,000 $288,400 $234,200 Normal losses are estimated to be 5% of the units transferred in from Moulding. Inspection takes place during the processing operation, at which point bad skis are separated from good skis and sold as scrap at $405 each. At inspection, 300 skis were rejected as scrap. These units had reached the following degree of completion: Transfer from Moulding 100% Direct materials added 80% Conversion costs 50% Work-in-progress at the end of June was 400 skis and had reached the following degree of completion: Transfer from Moulding 100% Direct materials added 60% Conversion costs 40% There was no work-in-progress in the Spraying Department at the beginning of the period. Direct materials added and conversion costs are incurred uniformly throughout the process. Required: (a) Compute the equivalent units for direct materials (From Moulding & Direct materials added) and conversion costs. (b) Compute the: Cost per equivalent unit for direct materials and conversion costs Total cost of the skis completed and transferred out to the Packing Department. Cost of the unexpected losses Cost of ending work in process inventory in the Spraying Department. (c) Prepare the Work in Process Inventory _ Spraying Department T-account, clearly showing the ending balance. (d) Prepare the journal entries for the use of total direct materials, direct labour incurred, manufacturing overhead applied and the cost of the units completed and transferred out
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.
Aquatic Pleasures Corporation manufactures water skis by way of three consecutive
processes: Moulding, Spraying & Packing. In the Moulding Department, fibre glass is heated
and shaped into the form of a ski. In the Spraying Department the skis are sprayed into various
colours and then sent to the Packing department where the skis are placed into cartons and
sent to the Finished Goods warehouse.
The following data relates to the Spraying Department for the month of October.
During October, 2,000 skis valued at $324.25 each were transferred from the Moulding
Department to the Spraying Department.
Other costs incurred during the month were:
Direct Materials Added
Direct Labour
Manufacturing
$204,000
$288,400
$234,200
Normal losses are estimated to be 5% of the units transferred in from Moulding. Inspection
takes place during the processing operation, at which point bad skis are separated from good
skis and sold as scrap at $405 each.
At inspection, 300 skis were rejected as scrap. These units had reached the following degree of
completion:
Transfer from Moulding 100%
Direct materials added 80%
Conversion costs 50%
Work-in-progress at the end of June was 400 skis and had reached the following degree of
completion:
Transfer from Moulding 100%
Direct materials added 60%
Conversion costs 40%
There was no work-in-progress in the Spraying Department at the beginning of the period.
Direct materials added and conversion costs are incurred uniformly throughout the process.
Required:
(a) Compute the equivalent units for direct materials (From Moulding & Direct materials
added) and conversion costs.
(b) Compute the:
Cost per equivalent unit for direct materials and conversion costs
Total cost of the skis completed and transferred out to the Packing Department.
Cost of the unexpected losses
Cost of ending work in process inventory in the Spraying Department.
(c) Prepare the Work in Process Inventory _ Spraying Department T-account, clearly
showing the ending balance.
(d) Prepare the
manufacturing overhead applied and the cost of the units completed and transferred out
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