Chapter 20, Problem P20A.45BPGB

To determine

Concept introduction:

Process costing system: Process costing systems is a system to assign the costs where the production goes through different processes. A product may take several processes to complete and when these processes are separable, the process costing system is applied to ascertain the cost of each process.

Production Cost report: Production cost report is made to summarize the details of production and cost activities in a process or department during a particular period. The Production cost report can be papered using FIFO or weighted average methods. Under the FIFO method the cost and equivalent units of beginning WIP is presented separately and calculations are done accordingly. Under the weighted average method the cost and equivalent units of beginning are not treated separately.

Conversion Costs: Conversion costs are manufacturing costs which are incurred to convert the raw material into finished good. These costs include direct labor and overheads.

Equivalent units: Equivalent unit is the product unit that is physically not completed but it is measured as equivalent to completed unit.

1. To prepare: The production cost report for the Mixing department of Smith Paper Co. for the Month of March using LIFO method