Dengo Co. makes a trail mix in two departments: Roasting and Blending. Direct materials are added at the beginning of each process, and conversion costs are added evenly throughout each process. The company uses the FIFO method of process costing. During October, the Roasting department completed and transferred 22,200 units to the Blending department. Of the units completed, 3,000 were from beginning inventory and the remaining 19,200 were started and completed during the month. Beginning work in process was 100% complete with respect to direct materials and 40% complete with respect to conversion. The company has 2,400 units (100% complete with respect to direct materials and 80% complete with respect to conversion) in process at month-end. Information on the Roasting department’s costs of beginning work in process inventory and costs added during the month follows. Cost Direct Materials Conversion Beginning work in process inventory . $ 9,900 $ 110,970 Added during the month . 248,400 1,082,970 Required 1. Prepare the Roasting department’s process cost summary for October using the FIFO method. 2. Prepare the journal entry dated October 31 to transfer the cost of completed units to the Blending department. Analysis Component 3. The company provides incentives to department managers by paying monthly bonuses based on their success in controlling costs per equivalent unit of production. Assume that a production department underestimates the percentage of completion for units in ending inventory with the result that its equivalent units of production for October are understated. Will this error increase or decrease the October bonuses paid?
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.
Dengo Co. makes a trail mix in two departments: Roasting and Blending. Direct materials are added at the
beginning of each process, and conversion costs are added evenly throughout each process. The company
uses the FIFO method of
22,200 units to the Blending department. Of the units completed, 3,000 were from beginning inventory
and the remaining 19,200 were started and completed during the month. Beginning work in process
was 100% complete with respect to direct materials and 40% complete with respect to conversion. The
company has 2,400 units (100% complete with respect to direct materials and 80% complete with respect
to conversion) in process at month-end. Information on the Roasting department’s costs of beginning work
in process inventory and costs added during the month follows. Cost Direct Materials Conversion
Beginning work in process inventory . $ 9,900 $ 110,970
Added during the month . 248,400 1,082,970 Required
1. Prepare the Roasting department’s process cost summary for October using the FIFO method.
2. Prepare the
department.
Analysis Component
3. The company provides incentives to department managers by paying monthly bonuses based on their
success in controlling costs per equivalent unit of production. Assume that a production department
underestimates the percentage of completion for units in ending inventory with the result that its
equivalent units of production for October are understated. Will this error increase or decrease the
October bonuses paid?
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