Saratoga Systems produces a single product. The production process requires all material to be brought to the shop floor before any work begins. The material is then processed and assembled and then transferred to finished goods inventory. Every unit is completely identical in specification and use, and no customization is possible. Because of the cost of the product, only a few units are produced in any one month. During June, only three units were started, and these were labelled ID061, ID062, and ID063. There was no beginning inventory of any kind on June 1. Records from the raw material store and employee time records show the following requisitions and direct labor costs: Direct Material $19,800 18,100 21,500 ID061 ID062 ID063 Direct Labor $ 19,000 16,000 5,200 The difference in the material cost represents the historical cost of material purchased at different times. The difference in labor cost represents the difference in seniority (not skill) of the individual employees. Overhead for the month of June totaled $70,350. During March, ID061 and ID062 were completed and transferred to finished goods. ID063 was still in process on June 30. Required: a. Suppose Saratoga Systems uses a job cost system and applies overhead to products based on direct labor cost. What will be the cost of the units transferred to finished goods? What will be the amount in Work-in-Process Ending Inventory? b. Suppose Saratoga Systems uses process costing and ID063 was 50 percent complete with respect to conversion cost (direct labor and overhead cost). Assume that direct materials cost is not traced to individual units. What will be the cost of the units transferred to finished goods? What will be the amount in Work-in-Process Ending Inventory? c. Based on the provided information, does process costing appear to be sufficient?
Saratoga Systems produces a single product. The production process requires all material to be brought to the shop floor before any work begins. The material is then processed and assembled and then transferred to finished goods inventory. Every unit is completely identical in specification and use, and no customization is possible. Because of the cost of the product, only a few units are produced in any one month. During June, only three units were started, and these were labelled ID061, ID062, and ID063. There was no beginning inventory of any kind on June 1. Records from the raw material store and employee time records show the following requisitions and direct labor costs: Direct Material $19,800 18,100 21,500 ID061 ID062 ID063 Direct Labor $ 19,000 16,000 5,200 The difference in the material cost represents the historical cost of material purchased at different times. The difference in labor cost represents the difference in seniority (not skill) of the individual employees. Overhead for the month of June totaled $70,350. During March, ID061 and ID062 were completed and transferred to finished goods. ID063 was still in process on June 30. Required: a. Suppose Saratoga Systems uses a job cost system and applies overhead to products based on direct labor cost. What will be the cost of the units transferred to finished goods? What will be the amount in Work-in-Process Ending Inventory? b. Suppose Saratoga Systems uses process costing and ID063 was 50 percent complete with respect to conversion cost (direct labor and overhead cost). Assume that direct materials cost is not traced to individual units. What will be the cost of the units transferred to finished goods? What will be the amount in Work-in-Process Ending Inventory? c. Based on the provided information, does process costing appear to be sufficient?
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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H 7
Transcribed Image Text:Saratoga Systems produces a single product. The production process requires all material to be brought to the shop floor
before any work begins. The material is then processed and assembled and then transferred to finished goods inventory.
Every unit is completely identical in specification and use, and no customization is possible. Because of the cost of the
product, only a few units are produced in any one month.
During June, only three units were started, and these were labelled ID061, ID062, and ID063. There was no beginning
inventory of any kind on June 1. Records from the raw material store and employee time records show the following
requisitions and direct labor costs:
Direct Material
$19,800
18, 100
21,500
The difference in the material cost represents the historical cost of material purchased at different times. The difference in
labor cost represents the difference in seniority (not skill) of the individual employees.
Overhead for the month of June totaled $70,350.
During March, ID061 and ID062 were completed and transferred to finished goods. ID063 was still in process on June 30.
equired:
a. Suppose Saratoga Systems uses a job cost system and applies overhead to products based on direct labor cost. What will
be the cost of the units transferred to finished goods? What will be the amount in Work-in-Process Ending Inventory?
b. Suppose Saratoga Systems uses process costing and ID063 was 50 percent complete with respect to conversion cost (direct
labor and overhead cost). Assume that direct materials cost is not traced to individual units. What will be the cost of the units
transferred to finished goods? What will be the amount in Work-in-Process Ending Inventory?
c. Based on the provided information, does process costing appear to be sufficient?
ID061
ID062
ID063
Direct
Labor
$ 19,000
16,000
5,200
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