XYZ is a manufacturer of furniture. It operates a weighted-average costing system and has two departments, cutting and assembly. The cutting department manufactures the furniture components and transfers them to the assembly department. In the assembly department, conversion costs are incurred evenly during the process, and direct materials are added when the assembly process is 80% completed. Spoiled units are detected when the conversion process is 70% completed. On average, XYZ expects spoiled units to be 5% of the good units that survived the inspection in the assembly department. The spoiled units are sold to a local shop for $8 per unit. The proceeds from the sale of spoiled units are credited to the cost of completed goods. In the month of January, 100 units were spoiled and sold to the local shop. Other data for the month of January,2021 are provided below: ASSEMBLY DEPARTMENT DATA FOR THE MONTH OF JANUARY, 2021 WIP, beginning inventory (85% completed) 400 Units Started in January(Transferred-in) 1,700 Units WIP, ending inventory (90% completed) 200 Units WIP, beginning inventory costs Transferred-in $5,500 Direct Materials $2,800 Conversion costs $7,160 Costs incurred in January Transferred-in $32,300 Direct materials $11,200 Conversion costs $17,440 Required: 1.For the month of January 2021, prepare the assembly department production report that includes a reconciliation of the physical units, and determines the cost of goods completed, the cost of ending work-in-process, and the loss from abnormal spoilage. Provide all necessary schedules to support your computations. 2. Prepare the journal entry to record the accounting of the assembly department production costs for the month of January 2021
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.
XYZ is a manufacturer of furniture. It operates a weighted-average costing system and has two departments, cutting and assembly. The cutting department manufactures the furniture components and transfers them to the assembly department.
In the assembly department, conversion costs are incurred evenly during the process, and direct materials are added when the assembly process is 80% completed.
Spoiled units are detected when the conversion process is 70% completed. On average, XYZ expects spoiled units to be 5% of the good units that survived the inspection in the assembly department.
The spoiled units are sold to a local shop for $8 per unit. The proceeds from the sale of spoiled units are credited to the cost of completed goods. In the month of January, 100 units were spoiled and sold to the local shop.
Other data for the month of January,2021 are provided below:
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ASSEMBLY DEPARTMENT DATA FOR THE MONTH OF JANUARY, 2021 |
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WIP, beginning inventory (85% completed) |
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400 Units |
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Started in January(Transferred-in) |
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1,700 Units |
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WIP, ending inventory (90% completed) |
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200 Units |
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WIP, beginning inventory costs |
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Transferred-in |
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$5,500 |
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Direct Materials |
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$2,800 |
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Conversion costs |
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$7,160 |
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Costs incurred in January |
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Transferred-in |
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$32,300 |
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Direct materials |
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$11,200 |
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Conversion costs |
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$17,440 |
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Required:
1.For the month of January 2021, prepare the assembly department production report that includes a reconciliation of the physical units, and determines the cost of goods completed, the cost of ending work-in-process, and the loss from abnormal spoilage. Provide all necessary schedules to support your computations.
2. Prepare the journal entry to record the accounting of the assembly department production costs for the month of January 2021
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