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e specifications. The product-costing syst ry (direct materials) and a single indirect Dasses through two departments -the Mix.

e specifications. The product-costing syst ry (direct materials) and a single indirect Dasses through two departments -the Mix.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Discussion Question 1 Cari Colors is a manufacturer of a specialized paint. All paint go through an identical manufacturing process. Every effort is made to ensure that all paint are identical and meet many demanding performance specifications. The product-costing system at the POS plant has a single direct-cost category (direct materials) and a single indirect-cost category (conversion costs). All paint passes through two departments -the Mixing Department and the Testing Department. Direct materials are added to the beginning of the process in Mixing. Conversion costs are added evenly throughout the two departments. When Mixing Department finishes work on the paint, it is immediately transferred to Testing. Cari Colors uses dthe Weighted-average method of process costing. Data for the Mixing Department for October 2017 are. Physical Unit Direct Materials Costs Conversion Costs (Paint) Work in process, October 1+ 20 S 460,000 S 120,000 Started during October 2017 80 Completed during October 2017 90 Work in process, October 31t 10 Costs added during October 2017 S2,000,000 $ 935,000 * Degree of completion: direct materials, ? % conversion costs, 60%. * Degree of completion: direct materials, ? % conversion costs, 70%. REQUIRED 1. For each cost element, compute equivalent units of work done on October 2017 in the Mixing Department. Show physical units in the first column. 2. For each cost element, calculate cost per equivalent unit of beginning work in process and of work done in October 2017. 3. Summarize the total Mixing Department costs for October 2017, and assign these costs to units completed (and transferred out) and to units in ending work in process using the Weighted-average method 4. Explain the concept of equivalent units by referring to the above data. 5. Explain how the cost per equivalent unit might be misleading to managers, particularly when a significant change in production is anticipated
Transcribed Image Text:Discussion Question 1 Cari Colors is a manufacturer of a specialized paint. All paint go through an identical manufacturing process. Every effort is made to ensure that all paint are identical and meet many demanding performance specifications. The product-costing system at the POS plant has a single direct-cost category (direct materials) and a single indirect-cost category (conversion costs). All paint passes through two departments -the Mixing Department and the Testing Department. Direct materials are added to the beginning of the process in Mixing. Conversion costs are added evenly throughout the two departments. When Mixing Department finishes work on the paint, it is immediately transferred to Testing. Cari Colors uses dthe Weighted-average method of process costing. Data for the Mixing Department for October 2017 are. Physical Unit Direct Materials Costs Conversion Costs (Paint) Work in process, October 1+ 20 S 460,000 S 120,000 Started during October 2017 80 Completed during October 2017 90 Work in process, October 31t 10 Costs added during October 2017 S2,000,000 $ 935,000 * Degree of completion: direct materials, ? % conversion costs, 60%. * Degree of completion: direct materials, ? % conversion costs, 70%. REQUIRED 1. For each cost element, compute equivalent units of work done on October 2017 in the Mixing Department. Show physical units in the first column. 2. For each cost element, calculate cost per equivalent unit of beginning work in process and of work done in October 2017. 3. Summarize the total Mixing Department costs for October 2017, and assign these costs to units completed (and transferred out) and to units in ending work in process using the Weighted-average method 4. Explain the concept of equivalent units by referring to the above data. 5. Explain how the cost per equivalent unit might be misleading to managers, particularly when a significant change in production is anticipated
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