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1.
Process costs
It is a method of cost accounting, which is used where the production is continuous, and the product needs various processes to complete. This method is used to ascertain the cost of the product at each process or stage of production.
Equivalents units for production
The activity of a processing department in terms of fully completed units is known as equivalent units. It includes the completed units of direct materials and conversion cost of beginning work in process, units completed and transferred out, and ending work in process.
Production cot report
A production cost report is a comprehensive report prepared for each department separately at the end of a particular period, which represents the physical flow and cost flow of product for the concerned department.
To Prepare: The four column account for work in process inventory balance rolling department from September to October of Company PA.
1.
Explanation of Solution
Prepare the four column account for work in process inventory balance rolling department from September to October of Company PA as shown below:
| Work in Process - Rolling | |||||
| Date | Item | Debit | Credit | Balance | |
| Debit | Credit | ||||
| Sept 1 | Balance, 2,600 units | $45,825 | |||
| Sept 30 | Smelting department | $462,400 | $508,225 | ||
| Sept 30 | Direct labor | $158,920 | $667,145 | ||
| Sept 30 | Factory |
$101,402 | $768,547 | ||
| Sept 30 | Finished goods | $702,195 | $66,352 | ||
| Sept 30 | Balance, 2,900 units | $66,352 | |||
| Oct 31 | Smelting department | $511,500 | $577,852 | ||
| Oct 31 | Direct labor | $162,850 | $740,702 | ||
| Oct 31 | Factory overhead | $104,494 | $845,196 | ||
| Oct 31 | Finished goods | $805,156 | $40,040 | ||
| Oct 31 | Balance, 2,000 units | $40,040 | |||
Table (1)
Hence, Work in process inventory ending balance for the month of September is $66,352 and for the month of October is $40,040.
a.
To Prepare: The equivalents units for production of direct materials and conversion cost of Company PA.
a.
Answer to Problem 18.4BPR
Prepare the equivalent units for production of direct materials and conversion cost of Company PA as shown below:
Figure (1)
Explanation of Solution
Working notes:
Calculate opening work in process inventory for conversion percentage to complete as shown below:
Calculate units started and completed in September as shown below:
Calculate ending work in process inventory units as shown below:
Total units to be assigned to costs is calculated by adding opening work in process inventory, units started and completed and ending work in process inventory.
Therefore, direct material equivalent units for production is 28,900 units and conversion cost equivalent units for production is 30,270 units.
b.
To Prepare: The cost per equivalent unit for direct material and conversion cost of Company PA.
b.
Answer to Problem 18.4BPR
Calculate the cost per equivalent unit for direct material and conversion cost of Company PA as shown below:
Explanation of Solution
Working note:
Calculate conversion cost for the month of September of Company PA as shown below:
Equivalent cost per unit for direct materials is calculated by dividing direct material cost by equivalent units for direct materials. Equivalent cost per unit for conversion cost is calculated by dividing conversion cost by equivalent units for conversion.
Therefore, equivalent cost per unit for direct material is $16.00 per unit and for conversion cost is $8.60 per unit.
c.
To Prepare: The cost of goods finished, between units stared in the prior period and units started and finished in September of Company PA.
c.
Explanation of Solution
Prepare the cost of goods finished, between units stared in the prior period and units started and finished in September of Company PA as shown below:
Figure (2)
Costs transferred to finished goods is calculated by adding opening inventory in September balance, to complete opening work in process inventory in September, and cost of units started and completed in September.
Hence, cost of completed work in process inventory in September 1 is $62,595, cost for started and completed in September is $639,600, and transferred to finished goods is $702,195.
d.
To Prepare: The ending work in
d.
Explanation of Solution
Prepare the ending work in process inventory cost of the month September for the Company PA as shown below:
Figure (3)
Ending work in process inventory cost is calculated by adding ending direct material cost and ending conversion costs.
Hence, ending work in process inventory cost for the month of September is $66,352.
2.
a.
To Prepare: The equivalents units for production of direct materials and conversion cost during the month of October for Company PA.
2.
a.
Answer to Problem 18.4BPR
Prepare the equivalents units for production of direct materials and conversion cost during the month of October for Company PA as shown below:
Figure (5)
Explanation of Solution
Working notes:
Calculate opening work in process inventory for conversion percentage to complete as shown below:
Calculate units started and completed in October as shown below:
Calculate ending work in process inventory units as shown below:
Total units to be assigned to costs is calculated by adding opening work in process inventory, units started and completed and ending work in process inventory.
Therefore, direct material equivalent units for production is 31,000 units and conversion cost equivalent units for production is 30,380 units.
b.
To Prepare: The cost per equivalent unit for direct material and conversion cost during the month of October for Company PA.
b.
Answer to Problem 18.4BPR
Calculate the cost per equivalent unit for direct material and conversion cost during the month of October for Company PA as shown below:
Explanation of Solution
Working note:
Calculate conversion cost for the month of September of Company PA as shown below:
Equivalent cost per unit for direct materials is calculated by dividing direct material cost by equivalent units for direct materials. Equivalent cost per unit for conversion cost is calculated by dividing conversion cost by equivalent units for conversion.
Therefore, equivalent cost per unit for direct material is $16.50 per unit and for conversion cost is $8.80 per unit.
c.
To Prepare: The cost of goods finished, between units stared in the prior period and units started and finished in October of Company PA.
c.
Explanation of Solution
Prepare the cost of goods finished, between units stared in the prior period and units started and finished in October of Company PA as shown below:
Figure (6)
Costs transferred to finished goods is calculated by adding opening inventory in September balance, to complete opening work in process inventory in September, and cost of units started and completed in September.
Hence, cost of completed work in process inventory in October 1 is $71,456, cost for started and completed in October is $733,700, and transferred to finished goods is $805,156.
d.
To Prepare:
The ending work in process inventory cost of the month October for the Company PA.
d.
Explanation of Solution
Prepare the ending work in process inventory cost of the month October for the Company PA as shown below:
Figure (7)
Ending work in process inventory cost is calculated by adding ending direct material cost and ending conversion costs.
Hence, ending work in process inventory cost for the month of October is $40,040.
3.
To Mention: The change in cost per equivalent unit for August through October for direct materials and conversion costs.
3.
Explanation of Solution
The cost per equivalent unit for direct material in August is $15.50 per unit, in September is $16.00 per unit, and in October is $16.50 per unit. Constantly direct material cost per unit is increased from August to October. Likewise, the cost per equivalent unit for conversion cost in August is $8.50 per unit, in September is $8.60 per unit, and in October $8.80 per unit. Constantly conversion cost per unit is increased from August to October. The Company PA scrutinizes for their underlying reasons, and any required remedial actions would be taken.
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Chapter 18 Solutions
Financial & Managerial Accounting
- Dublin Brewing Co. uses the process cost system. The following data, taken from the organizations books, reflect the results of manufacturing operations during October: Production Costs Work in process, beginning of period: Costs incurred during month: Production Data: 13,000 units finished and transferred to stockroom Work in process, end of period, 2,000 units one-half completed Required: Prepare a cost of production summary for October.arrow_forwardWork in process account data for two months; cost of production reports Hearty Soup Co. uses a process cost system to record the costs of processing soup, which requires the cooking and filling processes. Materials are entered from the cooking process at the beginning of the filling process. The inventory of Work in ProcessFilling on April 1 and debits to the account during April were as follows: During April, 800 units in process on April 1 were completed, and of the 7,800 units entering the department, all were completed except 550 units that were 90% completed. Charges to Work in ProcessFilling for May were as follows: During May, the units in process at the beginning of the month were completed, and of the 9,600 units entering the department, all were completed except 300 units that were 35% completed. Instructions 1. Enter the balance as of April 1, in a four-column account for Work in ProcessFilling. Record the debits and the credits in the account for April. 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 April, and (d) work in process inventory. 2. Provide the same information for May by recording the May transactions in the four-column work in process account. Construct a cost of production report, and present the May computations (A through D) listed in part (1). 3. Comment on the change in costs per equivalent unit for March through May for direct materials and conversion costs.arrow_forwardKokomo Kayak Inc. uses the process cost system. The following data, taken from the organizations books, reflect the results of manufacturing operations during the month of March: Production Costs Work in process, beginning of period: Costs incurred during month: Production Data: 18,000 units finished and transferred to stockroom. Work in process, end of period, 3,000 units, two-thirds completed. Required: Prepare a cost of production summary for March.arrow_forward
- The records of Stone Inc. reflect the following data: Work in process, beginning of month4,000 units one-fourth completed at a cost of 2,500 for materials, 1,400 for labor, and 1,800 for overhead. Production costs for the monthmaterials, 130,000; labor, 70,000; and factory overhead, 82,000. Units completed and transferred to stock45,000. Work in process, end of month5,000 units, one-half completed. Compute the months unit cost for each element of manufacturing cost and the total per unit cost. (Round unit costs to three decimal places.)arrow_forwardThe records of Burris Inc. reflect the following data: Work in process, beginning of month2,000 units one-half completed at a cost of 1,250 for materials, 675 for labor, and 950 for overhead. Production costs for the monthmaterials, 99,150; labor, 54,925; factory overhead, 75,050. Units completed and transferred to stock38,500. Work in process, end of month3,000 units, one-half completed. Compute the months unit cost for each element of manufacturing cost and the total per unit cost.arrow_forwardOn December 1, Carmel Valley Production Inc. had a work in process inventory of 1,200 units that were complete as to materials and 50% complete as to labor and overhead. December 1 costs follow: During December the following transactions occurred: a. Purchased materials costing 50,000 on account. b. Placed direct materials costing 49,000 into production. c. Incurred production wages totaling 50,500. d. Incurred overhead costs for December: e. Applied overhead to work in process at a predetermined rate of 125% of direct labor cost. f. Completed and transferred 10,000 units to finished goods. (Hint: You should first compute equivalent units and unit costs. The unit cost should include applied, not actual, factory overhead.) Carmel Valley uses the weighted average cost method. The ending inventory of work in process consisted of 1,000 units that were completed as to materials and 25% complete as to labor and overhead. Required: Prepare the journal entries to record the above December transactions.arrow_forward
- During March, the following costs were charged to the manufacturing department: $22,500 for materials; $45,625 for labor; and $50,000 for manufacturing overhead. The records show that 40,000 units were completed and transferred, while 10,000 remained in ending inventory. There were 45,000 equivalent units of material and 42,500 units of conversion costs. Using the weighted-average method, prepare the companys process cost summary for the month.arrow_forwardHolmes Products, Inc., produces plastic cases used for video cameras. The product passes through three departments. For April, the following equivalent units schedule was prepared for the first department: Costs assigned to beginning work in process: direct materials, 90,000; conversion costs, 33,750. Manufacturing costs incurred during April: direct materials, 75,000; conversion costs, 220,000. Holmes uses the weighted average method. Required: 1. Compute the unit cost for April. 2. Determine the cost of ending work in process and the cost of goods transferred out.arrow_forwardPrecision Inc. manufactures wristwatches on an assembly line. The work in process inventory as of March 1 consisted of 1,000 watches that were complete as to materials and 75% complete as to labor and overhead. The March 1 work in process costs were as follows: During the month, 10,000 units were started and 9,500 units were completed. The 1,500 units of ending inventory were complete as to materials and 25% complete as to labor and overhead. The costs for March were as follows: Calculate: a. Equivalent units for material, labor, and overhead, using the weighted average cost method b. Unit costs for materials, labor, and overhead c. Cost of the units completed and transferred d. Detailed cost of the ending inventory e. Total of all costs accounted forarrow_forward
- Cost of Direct Materials, Cost of Goods Manufactured, Cost of Goods Sold Bisby Company manufactures fishing rods. At the beginning of July, the following information was supplied by its accountant: During July, the direct labor cost was 43,500, raw materials purchases were 64,000, and the total overhead cost was 108,750. The inventories at the end of July were: Required: 1. What is the cost of the direct materials used in production during July? 2. What is the cost of goods manufactured for July? 3. What is the cost of goods sold for July?arrow_forwardKimbeth Manufacturing uses a process cost system to manufacture dust density sensors for the mining industry. The following information pertains to operations for the month of May: The beginning inventory was 60% complete for materials and 20% complete for conversion costs. The ending inventory was 90% complete for materials and 40% complete for conversion costs. Costs pertaining to the month of May are: Beginning inventory costs: materials, 54,560; direct labor, 20,320; and factory overhead, 15,240. Costs incurred during May: materials used, 468,000; direct labor, 182,880; and factory overhead, 391,160. Using the first-in, first-out (FIFO) method, the equivalent units of production for conversion costs are: a. 101,600 units. b. 85,600 units. c. 98,400 units. d. 88,800 units.arrow_forwardRockford Company has four departmental accounts: Building Maintenance, General Factory Overhead, Machining, and Assembly. The direct labor hour method is used to apply factory overhead to the jobs being worked on in Machining and Assembly. The company expects each production department to use 30,000 direct labor hours during the year. The estimated overhead rates for the year include the following: During the year, both Machining and Assembly used 28,000 direct labor hours. Factory overhead costs incurred during the year follow: In determining application rates at the beginning of the year, cost allocations were made as follows, using the sequential distribution method: Building Maintenance to: General Factory Overhead, 10%; Machining, 50%; Assembly, 40%. General factory overhead was distributed according to direct labor hours. Required: Determine the under- or overapplied overhead for each production department. (Hint: First you must distribute the service department costs.)arrow_forward
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