Letcher Corporation makes blue jeans. Its process involves two departments, cutting and sewing. The following data pertain to the cutting department's transactions in Year 2. 1. The beginning balance in work in process inventory was $30,000. This inventory consisted of fabric for 7,000 pairs of jeans. The beginning balances in raw materials inventory, production supplies, and cash were $224,000, $20,800, and $286,000, respectively. 2. Direct materials costing $167,200 were issued to the cutting department; this amount of materials was sufficient to start work on 21,000 pairs of jeans. 3. Direct labor cost was $144,000, and indirect labor cost was $32,400. All labor costs were paid in cash. 4. The predetermined overhead rate was $0.45 per direct labor dollar. 5. Actual overhead costs other than indirect materials and indirect labor for the year amounted to $12,000, which was paid in cash. 6. The cutting department completed cutting 20,000 pairs of jeans. The remaining jeans were 40 percent complete. 7. The completed units of cut fabric were transferred to the sewing department. 8. All of the production supplies had been used by the end of the year. 9. Over- or underapplied overhead was closed to the Cost of Goods Sold account. Required a. Determine the number of equivalent units of production. b. Determine the product cost per equivalent unit. c. Allocate the total cost between ending work in process inventory and units transferred to the sewing department.
Letcher Corporation makes blue jeans. Its process involves two departments, cutting and sewing. The following data pertain to the cutting department's transactions in Year 2. 1. The beginning balance in work in process inventory was $30,000. This inventory consisted of fabric for 7,000 pairs of jeans. The beginning balances in raw materials inventory, production supplies, and cash were $224,000, $20,800, and $286,000, respectively. 2. Direct materials costing $167,200 were issued to the cutting department; this amount of materials was sufficient to start work on 21,000 pairs of jeans. 3. Direct labor cost was $144,000, and indirect labor cost was $32,400. All labor costs were paid in cash. 4. The predetermined overhead rate was $0.45 per direct labor dollar. 5. Actual overhead costs other than indirect materials and indirect labor for the year amounted to $12,000, which was paid in cash. 6. The cutting department completed cutting 20,000 pairs of jeans. The remaining jeans were 40 percent complete. 7. The completed units of cut fabric were transferred to the sewing department. 8. All of the production supplies had been used by the end of the year. 9. Over- or underapplied overhead was closed to the Cost of Goods Sold account. Required a. Determine the number of equivalent units of production. b. Determine the product cost per equivalent unit. c. Allocate the total cost between ending work in process inventory and units transferred to the sewing department.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
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.
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Transcribed Image Text:Letcher Corporation makes blue jeans. Its process involves two departments, cutting and sewing. The
following data pertain to the cutting department's transactions in Year 2.
1. The beginning balance in work in process inventory was $30,000. This inventory consisted of fabric
for 7,000 pairs of jeans. The beginning balances in raw materials inventory, production supplies,
and cash were $224,000, $20,800, and $286,000, respectively.
2. Direct materials costing $167,200 were issued to the cutting department; this amount of materials
was sufficient to start work on 21,000 pairs of jeans.
3. Direct labor cost was $144,000, and indirect labor cost was $32,400. All labor costs were paid
in cash.
4. The predetermined overhead rate was $0.45 per direct labor dollar.
5. Actual overhead costs other than indirect materials and indirect labor for the year amounted to
$12,000, which was paid in cash.
6. The cutting department completed cutting 20,000 pairs of jeans. The remaining jeans were
40 percent complete.
7. The completed units of cut fabric were transferred to the sewing department.
8. All of the production supplies had been used by the end of the year.
9. Over- or underapplied overhead was closed to the Cost of Goods Sold account.
Required
a. Determine the number of equivalent units of production.
b. Determine the product cost per equivalent unit.
c. Allocate the total cost between ending work in process inventory and units transferred to the
sewing department.
d. Record the transactions in a partial set of T-accounts.
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