Problem Set 2Caricolor Limited operates a paint manufacturing plant, housing two distinct departments: themixing department and the quality control department. The paint undergoes sequentialprocessing in both of these departments. The company's process-costing system is structured around two primary cost categories:direct materials and conversion costs. Direct materials are introduced at the initial stages ofthe process, while conversion costs are gradually incurred throughout the process. Aftercompletion of the mixing department's tasks on the paint, the product is promptly forwardedto the quality control department. Caricolor employs the weighted-average method forprocess costing to calculate its manufacturing costs.Data for the mixing department for October 2020 are as follows: Physical Units (Gallons of Paint) Direct Materials ConversionCostsWork in process, October x 16,000 $2,800,000 $ 901,400Started during October 2020 44,000Completed during October 2020 51,000Work in process, October 31y 9,000 Total costs added during October 2020 $9,400,000 $5,111,000 x Degree of completion: direct materials, 100%; conversion costs, 60%. y Degree of completion: direct materials, 100%; conversion costs, 70%. Required:1. Compute equivalent units in the mixing department, for each cost category? 2. Summarize total mixing department costs for October 2020 for each cost category, andcalculate the cost per equivalent unit? 3. Assign total costs to units completed and transferred out and to units in ending work inprocess? 4. By reference to the above data:a) Explain the concept of equivalent units in process costing? b) What issues should a manager focus on when reviewing the equivalent unitcalculation?
Problem Set 2
Caricolor Limited operates a paint manufacturing plant, housing two distinct departments: the
mixing department and the quality control department. The paint undergoes sequential
processing in both of these departments.
The company's process-costing system is structured around two primary cost categories:
direct materials and conversion costs. Direct materials are introduced at the initial stages of
the process, while conversion costs are gradually incurred throughout the process. After
completion of the mixing department's tasks on the paint, the product is promptly forwarded
to the quality control department. Caricolor employs the weighted-average method for
Data for the mixing department for October 2020 are as follows:
Physical Units
(Gallons of Paint) Direct Materials Conversion
Costs
Work in process, October x 16,000 $2,800,000 $ 901,400
Started during October 2020 44,000
Completed during October 2020 51,000
Work in process, October 31y 9,000
Total costs added during October 2020 $9,400,000 $5,111,000
x Degree of completion: direct materials, 100%; conversion costs, 60%.
y Degree of completion: direct materials, 100%; conversion costs, 70%.
Required:
1. Compute equivalent units in the mixing department, for each cost category?
2. Summarize total mixing department costs for October 2020 for each cost category, and
calculate the cost per equivalent unit?
3. Assign total costs to units completed and transferred out and to units in ending work in
process?
4. By reference to the above data:
a) Explain the concept of equivalent units in process costing?
b) What issues should a manager focus on when reviewing the equivalent unit
calculation?
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