Grand Canyon Toy Company manufactures talking toy Christmas kitten in four sequential processes. The Christmas kitten is a new remote control toy that will be available this year just in time for Christmas. An internal computer in the kitten makes the toy meow, walk, purr, and speak English or Spanish. The computer memory may be programmed with short phrases such as “Merry Christmas” or “Happy New Year.” The Fourth process is the last step before the kittens are transferred to the warehouse as finished inventory. All material needed to complete the Christmas kittens is added at the 70 percent stage of completion in the Fourth Process. Grand Canyon Toys accumulated the following cost information for the Fourth process during the month of October: Summary of Units Beginning Work in Process............................................ 40,000 Units transferred in from the third process during October 140,000 Units completed and transferred to finished goods........ 130,000 Ending Work in Process (50% as to conversion costs).... 50,000 Summary of Costs Beginning Work in Process: ($960,000 transferred-in costs, $215,000 direct materials, & $445,000 conversion costs) $1,620,000 Cost of units transferred in from the third process.... 1,740,000 Manufacturing costs incurred in October:
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.
Grand Canyon Toy Company manufactures talking toy Christmas kitten in four sequential processes. The Christmas kitten is a new remote control toy that will be available this year just in time for Christmas. An internal computer in the kitten makes the toy meow, walk, purr, and speak English or Spanish. The computer memory may be programmed with short phrases such as “Merry Christmas” or “Happy New Year.”
The Fourth process is the last step before the kittens are transferred to the warehouse as finished inventory. All material needed to complete the Christmas kittens is added at the 70 percent stage of completion in the Fourth Process. Grand Canyon Toys accumulated the following cost information for the Fourth process during the month of October:
Summary of Units
Beginning Work in Process............................................ 40,000
Units transferred in from the third process during October 140,000
Units completed and transferred to finished goods........ 130,000
Ending Work in Process (50% as to conversion costs).... 50,000
Summary of Costs
Beginning Work in Process:
($960,000 transferred-in costs,
$215,000 direct materials, & $445,000 conversion costs) $1,620,000
Cost of units transferred in from the third process.... 1,740,000
Direct materials .............................................. 1,280,000
Conversion costs............................................. 2,500,000
Total costs to account for......................................... $7,140,000
Instructions:
- Prepare a cost of production report for the month of October.
- Prepare
journal entries to record:
(1) Transfer of the 140,000 units from the Third Process into the Fourth process.
(2) Manufacturing costs charged to the Fourth Process.
(3) Transfer of the completed units from the Fourth Process to the finished goods warehouse.
Post the above entries to a “T” account, making sure it balances with the amount you assigned to ending work in process on the cost of production report.
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