Michael's Pottery makes decorative garden pieces using three consecutive processes: Moulding, Baking & Spraying. Quality control check takes place during the process, at which point, rejected units are separated from good units. The following details relate to production for the month of October 2020, for the Baking Department. i) Work-in-process, October 1: -0- ii) Transfer from Moulding: 2,000 units valued at $336.40 each iii) Other manufacturing costs incurred during October: Direct material added $202,120 Direct Manufacturing Wages $212,840 Manufacturing Overhead Applied $306,160 iv) Normal losses are estimated to be 5% of the units transferred in during the period. Losses from the Baking Department are deemed to be scrap and sold at $382 each. v) At inspection 300 decorative pieces were rejected as scrap. These units had reached the following degree of completion: From Moulding 100% Direct material added 40% Conversion costs 12½% vi) 1,200 pieces were completed and transferred out to the Spraying Department. vii) Work-in-process at the end of October had reached the following degree of completion:
Michael's Pottery makes decorative garden pieces using three consecutive processes: Moulding, Baking & Spraying. Quality control check takes place during the process, at which point, rejected units are separated from good units. The following details relate to production for the month of October 2020, for the Baking Department. i) Work-in-process, October 1: -0- ii) Transfer from Moulding: 2,000 units valued at $336.40 each iii) Other manufacturing costs incurred during October: Direct material added $202,120 Direct Manufacturing Wages $212,840 Manufacturing Overhead Applied $306,160 iv) Normal losses are estimated to be 5% of the units transferred in during the period. Losses from the Baking Department are deemed to be scrap and sold at $382 each. v) At inspection 300 decorative pieces were rejected as scrap. These units had reached the following degree of completion: From Moulding 100% Direct material added 40% Conversion costs 12½% vi) 1,200 pieces were completed and transferred out to the Spraying Department. vii) Work-in-process at the end of October had reached the following degree of completion:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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:4:01 O
O l 57%i
PART 2
Michael's Pottery makes decorative garden pieces using three consecutive
processes: Moulding, Baking & Spraying. Quality control check takes place during the
process, at which point, rejected units are separated from good units.
The following details relate to production for the month of October 2020, for the
Baking Department.
i) Work-in-process, October 1: -0-
ii) Transfer from Moulding: 2,000 units valued at $336.40 each
iii) Other manufacturing costs incurred during October:
Direct material added
$202,120
$212,840
$306,160
Direct Manufacturing Wages
Manufacturing Overhead Applied
iv) Normal losses are estimated to be 5% of the units transferred in during the
period. Losses from the Baking Department are deemed to be scrap and
sold at $382 each.
v) At inspection 300 decorative pieces were rejected as scrap. These units had
reached the following
degree of completion:
From Moulding
100%
Direct material added
40%
Conversion costs
122%
vi) 1,200 pieces were completed and transferred out to the Spraying Department.
vii) Work-in-process at the end of October had reached the following degree of
completion:
From Moulding
100%
Direct material added
70%
Conversion costs
55%
Direct materials added and conversion costs are incurred uniformly throughout the
process.
Required:
(a) Prepare a statement of equivalent production to determine the equivalent units
for direct materials (From Moulding & Direct Material Added), and conversion
costs and the cost per equivalent unit for
direct materials and conversion costs.
(b) Calculate the:
Total cost of units completed and transferred to the Spraying Department
-
- Cost of abnormal losses
Cost of ending work-in-process inventory in the Baking Department
(c) Prepare Michael Pottery's Work-In-Process Inventory – Baking Department T-
account, clearly showing
the ending balance.
(d) State the journal entries necessary to record the assignment of direct materials,
direct manufacturing wages and manufacturing overhead applied to the Baking
Department. Also give the journal entries to
record the cost of goods completed and transferred to the Spraying
Department.
(e) Given that 25% of the unexpected losses were because of pilferage, prepare the
abnormal spoilage
statement, clearly showing Michael Pottery's true
loss.
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