Pittsburgh Aluminum Company uses a process cost system to record the costs of manufacturing rolled aluminum, which consists of the smelting and rolling processes. Materials are entered from smelting at the beginning of the rolling process. The inventory of Work in Process—Rolling on September 1 and debits to the account during September were as follows: Bal., 600 units, 70% completed:
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.
Work in Process Account Data for Two Months; Cost of Production Reports
Pittsburgh Aluminum Company uses a
| Bal., 600 units, 70% completed: | ||
| Direct materials (600 x $7.70) | $ 4,620 | |
| Conversion (600 x 70% x $3.20) | 1,344 | |
| $ 5,964 | ||
| From Smelting Department, 12,960 units | $101,088 | |
| Direct labor | 25,584 | |
| Factory overhead | 13,776 |
During September, 600 units in process on September 1 were completed, and of the 12,960 units entering the department, all were completed except 1,400 units that were 40% completed. Charges to Work in Process—Rolling for October were as follows:
| From Smelting Department, 14,900 units | $119,200 |
| Direct labor | 33,370 |
| Factory overhead | 17,970 |
During October, the units in process at the beginning of the month were completed, and of the 14,900 units entering the department, all were completed except 800 units that were 20% completed.
Required:
1. Enter the balance as of September 1 in a four-column account for Work in Process—Rolling. Record the debits and the credits in the account for September. Construct a cost of production report and present computations for determining (a) equivalent units of production for materials and conversion, (b) costs per equivalent unit, (c) cost of goods finished, differentiating between units started in the prior period and units started and finished in September, and (d) work in process inventory. If an amount box does not require an entry, leave it blank.
| ACCOUNT | Work in Process-Rolling Department | ACCOUNT NO. | ||||
|---|---|---|---|---|---|---|
| BALANCE | ||||||
| DATE | ITEM | POST. REF. | DEBIT | CREDIT | DEBIT | CREDIT |
| Sept. 1 | Bal., 600 units, 70% completed | |||||
| Sept. 30 | Smelting Dept., 12,960 units at $7.8 | |||||
| Sept. 30 | Direct labor | |||||
| Sept. 30 | Factory overhead | |||||
| Sept. 30 | Finished goods | |||||
| Sept. 30 | Bal., 1,400 units, 40% completed |
If an amount is zero, enter in a zero "0". Round cost per unit answers to the nearest cent.
| Pittsburgh Aluminum Company Cost of Production Report-Rolling Department For the Month Ended September 30 |
|||
|---|---|---|---|
| Whole Units | Equivalent Units | ||
| Units | Direct Materials (a) | Conversion (a) | |
| Units charged to production: | |||
| Inventory in process, September 1 | |||
| Received from Smelting Department | |||
| Total units accounted for by the Rolling Department | |||
| Units to be assigned costs: | |||
| Inventory in process, September 1 | |||
| Started and completed in September | |||
| Transferred to finished goods in September | |||
| Inventory in process, September 30 | |||
| Total units to be assigned costs |
| Costs | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Costs | Direct Materials | Conversion | Total Costs | |||||||||
| Cost per equivalent unit: | ||||||||||||
| Total costs for September in Rolling Department | ||||||||||||
| Total equivalent units | ||||||||||||
| Cost per equivalent unit (b) | ||||||||||||
| Costs assigned to production: | ||||||||||||
| Inventory in process, September 1 | ||||||||||||
| Costs incurred in September | ||||||||||||
| Total costs accounted for by the Rolling Department | ||||||||||||
| Costs allocated to completed and partially completed units: | ||||||||||||
| Inventory in process, September 1 balance (c) | ||||||||||||
| To complete inventory in process, September 1 (c) | ||||||||||||
| Cost of completed September 1 work in process | ||||||||||||
| Started and completed in September (c) | ||||||||||||
| Transferred to finished goods in September (c) | ||||||||||||
| Inventory in process, September 30 (d) | ||||||||||||
| Total costs assigned by the Rolling Department |
2. Provide the same information for October by recording the October transactions in the four-column work in process account. Construct a cost of production report, and present the October computations (a through d) listed in part (1). If an amount box does not require an entry, leave it blank.
| ACCOUNT | Work in Process-Rolling Department | ACCOUNT NO. | ||||
|---|---|---|---|---|---|---|
| Balance | ||||||
| DATE | ITEM | POST. REF. | DEBIT | CREDIT | DEBIT | CREDIT |
| October 1 | Balance | |||||
| October 31 | Smelting Dept., 14,900 units at $8 | |||||
| October 31 | Direct labor | |||||
| October 31 | Factory overhead | |||||
| October 31 | Finished goods | |||||
| October 31 | Bal., 800 units, 20% completed |
If an amount is zero, enter in a zero "0". Round cost per unit answers to the nearest cent.
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